ETE officially terminates Williams merger, Williams prepared to fight

On June 20th, a Williams Cos Inc board member testified she felt pressured by her own company to support the $20 billion merger

merger

Williams Cos pipeline

DALLAS-Energy Transfer Equity, L.P. announced termination of its merger agreement with The Williams Companies, Inc. effective June 29.

This news comes as Williams announced that shareholders on June 27th voted in favour of the merger.

“During times of distress, we observe consolidation in the industry, and this could have been a manifestation of that.  For shareholders, the merger could have been a ‘good idea’ in the sense of capturing economies of scale – e.g., cost savings due to labor cutbacks,” said Ehud Ronn, professor of finance at the University of Texas at Austin in an email.

Professor Ronn also noted that “since June 2014, gas prices have declined 37 per cent and oil prices 52 per cent,” creating a great deal of uncertainty in the US pipeline market.

“To the degree the price payable to Williams was not ‘linked’ to commodity prices, ETE may feel Williams’ current value does not justify the higher price they had originally quoted,” said Prof. Ronn.

The two parties disagree over ETE’s right to terminate the merger.

Williams released a statement saying it does not believe ETE had the right because ETE breached the agreement by (among other reasons) failing to “cooperate and use necessary efforts to satisfy the conditions to closing, including delivery of Latham & Watkins LLP’s Section 721(a) tax opinion.”

 Williams says they recognize the practical fact that ETE has refused to close the merger.

Williams has concluded that it is in the best interests of its stockholders to seek, among other remedies, monetary damages from ETE for its breaches.

Williams is appealing the court ruling that allowed ETE to walk away from the merger.

Unless Williams is successful in the Delaware Court’s appeal, it seems this story has reached its dramatic conclusion.

 

Posted in: Energy Financial

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