DALLAS, Texas – Energy Transfer Equity, L.P. says it has filed its Affirmative Defenses and Counterclaim in the lawsuit brought by The Williams Companies, Inc. over tax issues that threaten their $20 billion merger.
The trial is scheduled to begin on June 20 in Delaware. The companies also set a shareholder vote on the deal for June 27, according to a filing with the Securities and Exchange Commission.
Williams has accused ETE of trying to get out of the deal and filed a lawsuit in the Delaware Court of Chancery to prevent the Dallas-based company from terminating its takeover over a tax issue or if the deal isn’t closed by a June 28 deadline.
ETE said it has filed a counterclaim to Williams’ lawsuit.
The lawsuits are the latest twist in what has been a testy transaction almost from the get-go.
Kelcy Warren, the billionaire chief executive of Energy Transfer, set his sights on Williams last year to transform his business into one of the world’s biggest pipeline networks, launching an unsolicited bid in June and reaching a deal in late September that was then worth $33 billion.
The timing was poor. Oil and gas prices dropped significantly after it was announced, the companies’ shares dropped sharply and investors started to worry that the $6 billion cash portion of the deal would saddle ETE with too much debt.
The counterclaim alleges that Williams breached the merger agreement entered into with ETE on Sept. 28, by, among other things:
- the Williams board of directors modifying or qualifying its approval and recommendation of the merger by, among other things, (i) modifying, qualifying or disclaiming the fundamental bases for its original recommendation of the merger, including by concluding that the fairness opinions obtained by the Williams board of directors are no longer reliable and declining to obtain new fairness opinions, (ii) refusing to reconfirm its recommendation of the merger that was made on September 28, 2015 in the face of such disclaimers, and (iii) consistently making public statements implying that the Williams Board supports enforcing the merger agreement as opposed to completing the merger;
- refusing to cooperate with ETE’s efforts to finance the merger;
- failing to use reasonable best efforts to complete the merger; and
- suing Kelcy Warren, the Chairman of the Board of Directors of ETE’s general partner, personally in Dallas County, Texas in violation of a mandatory forum selection provision in the merger agreement.
ETE seeks a declaratory judgment that Williams has breached the merger agreement, including by its board of directors modifying or qualifying its approval and recommendation of the merger, and that due to Williams’ breaches and its delays in bringing its claims, Williams is not entitled to the relief it seeks.
ETE also seeks a judgment that due to Williams’ breaches of the merger agreement, ETE is entitled to immediately terminate the merger agreement.
In the event ETE is entitled to and does terminate the merger agreement due to a modification or qualification of the Williams board of directors’ recommendation of the merger, Williams would owe ETE a termination fee of $1.48 billion.
In addition, ETE seeks a declaratory judgment that, in the event Latham & Watkins LLP (“Latham”), its outside tax counsel, is not able to deliver a 721(a) tax opinion prior to the outside date of June 28, 2016 set forth in the merger agreement, ETE will be entitled to terminate the merger agreement without penalty due to the failure of a closing condition.
With files from Reuters.