Williams Cos plans to go it alone after ETE deal collapse

Williams Cos CEO Alan Armstrong believes the company is “in a real sweet spot” as it is very narrowly focussed on growing natural gas volumes. Reuters photo by Donna W. Carson.

Williams Cos shares down nearly 60 per cent since last year

By Michael Erman and Mike Stone

NEW YORK, Aug 1 (Reuters) – Pipeline company Williams Cos Inc on Monday laid out plans to move forward as a standalone company and invest $1.7 billion in its master limited partnership, Williams Partners, in the wake of the breakup of its more than $20 billion takeover by EnergyTransfer Equity LP.

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Williams’ shares have fallen nearly 60 percent over the last year as the company fought unsuccessfully to force Energy Transfer Equity to close its agreed-upon purchase. Shortly following the deal’s collapse in June, nearly half of Williams’ board resigned after failing in an attempt to oust Chief Executive Alan Armstrong.

Representatives of two of the company’s largest investors – Corvex Management and Soroban Capital Partners – were among the directors to step down. Corvex and Soroban spent years agitating for Williams to sell itself.

Armstrong said in an interview that the current wave of capital investment by industrial companies on assets that are dependent on natural gas will strongly benefit Williams over the next three or four years.

“I don’t think there’s anybody positioned the way Williams is right now, very narrowly focused on the concept of growing natural gas volumes,” he said. “I really think we’ve got ourselves in a real sweet spot.”

Williams on Monday posted a second-quarter loss, largely due to a one-time charge related to the upcoming sale of its Canadian operations. The company said it expects to finalize the sale this quarter, with combined proceeds of more than $1 billion.

Williams said it will slash its quarterly dividend by more than two-thirds, to 20 cents per share from 64 cents previously, in order to help pay for the reinvestment in Williams Partners. Williams previously said it would need to cut back its payouts if the Energy Transfer deal fell apart.

A Delaware judge ruled in June that ETE could terminate the deal over tax issues. The deal had been in doubt for months, with Williams suing Energy Transfer, accusing the company of breaching their deal in trying to back out.

The merger, which had won regulatory approval with conditions, would have created one of the country’s largest pipeline companies.

Williams also unveiled a distribution reinvestment plan that will allow it and other investors in Williams Partners to forego payouts from the partnership in exchange for new Williams Partners units. Most of the roughly $1.7 billion Williams expects to reinvest in the partnership will be through this program, the company said.

Williams controls and is the majority shareholder of Williams Partners. Williams’ new investment is meant to help the partnership reduce debt and maintain an investment-grade credit rating.

The company has considered buying out Williams Partners in the past and could revisit such a transaction, Armstrong said.

“Right now our focus ought to be really crisp execution, running the business. That opportunity sits out there as upside, perhaps, in the future,” Armstrong said.

(Reporting by Michael Erman and Mike Stone; Editing by Leslie Adler)