M&A

There is something about the proposed merger of Energy Transfer Equity and Williams that’s been bugging us. A uneasy feeling. Why is Williams trying so hard to make this deal happen–when they resisted it just as hard in the beginning? What changed? Why are they now insisting that ETE–who has gotten cold feet and wants out–go forward? Recently Williams published a letter from Institutional Shareholder Services (ISS)–a “leading proxy advisory firm”–recommending that shareholders in Williams vote “yes” on the merger with ETE (see Williams Tries, One Last Time, to Garner Support for ETE Merger). An analyst, writing on the Seeking Alpha investors website, takes Williams and ISS to task–ripping apart the ISS endorsement of the merger. Among his points we found this one the most powerful: “If we are to believe the road show documents filed by WMB to promote the company’s sale to Energy Transfer Equity LP, the same network of pipelines, storage facilities and processing plants owned by WMB and its affiliate, Williams Partners LP, would struggle to produce free cash flow if operated by WMB as a standalone company, yet somehow deliver prosperity as a junior affiliate of ETE.” Exactly! Why would the combined new company, hobbled with more debt, be more successful than each standalone company with less debt? Answer: It wouldn’t. This is a snow job. And for some reason ISS and now a couple of other proxy firms have believed that hogwash…
Read More “Williams/ETE Merger Defies Logic – Here’s Why”

On Friday Williams issued a couple of interesting press releases related to what they hope is a vote to accept Energy Transfer Equity’s offer of a merger. The first press release says the Williams board will pay shareholders 10 cents per share as a bonus if they vote “for” the merger. A little incentive. What we would call a bribe–although there’s nothing illegal about it. It smacks of desperation in our book. But perhaps we know why they’re offering a little more honey to entice people to vote “yes” for the merger. That’s because of the second press release. When the merger was first announced, both ETE and Williams claimed there would be “$2 billion in annual synergies” between the two companies following a merger (see Williams Accepts ETE’s “Indecent Proposal” – Price Went Down $10B). Williams’ second press release on Friday revised that $2 billion “benefit” number down–to almost nothing. Now the claim is there will be $126 million in synergies–94% less than the original claim…
Read More “Williams “Incentivizes” Shareholders to Vote for Merger”

Yesterday Williams published a letter from Institutional Shareholder Services (ISS)–a “leading proxy advisory firm”–recommending that shareholders in Williams should vote “yes” on the merger with Energy Transfer Equity (ETE). Williams will hold a special shareholder’s meeting on Monday, June 27, to vote on the proposed merger. Even if a majority votes in favor of the merger–far from a foregone conclusion–it’s still not a done deal. ETE continues to assert that expert opinions on the taxability of the merger may scuttle the deal. Just a few weeks ago ETE sued Williams to abort the deal (see Midstream Soap: ETE Sues to Walk Away from Williams Takeover Deal). We view all of this–voting for the merger, etc.–as posturing. Fodder for the lawyers to use after the deal fails to consummate. Here’s the latest in our ongoing soap opera that we call, As the (Midstream) World Turns…
Read More “Williams Tries, One Last Time, to Garner Support for ETE Merger”

As MDN reported on Friday, the Federal Trade Commission has granted conditional approval of the Energy Transfer Equity (ETE)/Williams merger deal. The one condition FTC made is that Williams must sell its 50% ownership in Gulfstream Natural Gas System LLC, located in Florida (see As the (Midstream) World Turns: FTC Approves ETE/Williams Merger). ETE has been looking for a way to back out of the deal without losing its shirt in the process. So the question becomes, Will ETE use the FTC condition to scuttle the deal? Or at a minimum, use it to drive Williams back to the table to renegotiate the deal?…
Read More “Will ETE Use FTC’s “Condition” to Scuttle Proposed Williams Merger?”

Last week three former CEOs of the Williams Companies sent a letter to Williams shareholders outlining their reasons for voting against the proposed merger with Energy Transfer Equity (copy of the letter embedded below). The CEOs urge all shareholders to “strongly consider” voting against the deal. The CEOs say the deal would give Williams shareholders a permanent second class status. The mayor of Tulsa, Oklahoma–where Williams is headquartered–is also voicing his opposition to the proposed merger. Mayor Dewey Bartlett Jr. said in his own letter that the merger has no “economic merit” and would be “tragic” for both the city shareholders. MDN told you yesterday we’re dubious the deal will actually happen, based on all of the legal posturing we see (see ETE & Williams Engage in More Posturing Before June 24 Deadline). Will the letter from the CEOs and Tulsa mayor have any effect on the deal?…
Read More “Tulsa Mayor, 3 Former Williams CEOs Blast ETE Merger Deal”

The ongoing soap opera of whether or not Energy Transfer Equity really will buy Williams continues to play out. Yesterday ETE (and Williams) issued press releases announcing that Williams shareholders have until 5 pm on June 24 to provide their official voting documentation on the merger. ETE is careful to point out that Williams shareholders should hold on to their shares–not turn them in–until the merger is official and completed. ETE also says once they’ve voted on the merger, Williams shareholders can’t turn around and sell their Williams shares of stock until the final merger is either declared a “go” or a “no go.” The elaborate ands, ifs & buts in the ETE statement still leaves us wondering whether or not this is all just kabuki theater–a show–with no real intention of closing on the merger. Case in point: here’s what ETE’s lawyers said in yesterday’s announcement…
Read More “ETE & Williams Engage in More Posturing Before June 24 Deadline”

Last year midstream giant Energy Transfer Equity and its CEO Kelsy Warren pursued Williams, for months, and finally got Williams to agree to a deal to sell itself to Warren for $38 billion (see Williams Accepts ETE’s “Indecent Proposal” – Price Went Down $10B). Over the following months, the gas market tanked price-wise, and Warren got cold feet (see ETE Wants Out of Williams Merger/Takeover, Offering $2B Breakup Fee). Then he wanted to change the deal, making it an all stock-swap deal instead of having to pony up billions in cash–because of tax implications. Along the way Warren got his board to issue a sweetheart stock deal to himself and other top managers/investors as a hedge against the deal, which enraged Williams (see Merger Turns Sour: Williams Sues ETE/CEO Kelcy Warren). On a quarterly earnings call yesterday, ETE’s top brass addressed the Williams merger controversy. CEO Kelsy Warren said point blank: “I’d like to be really direct about this. We can’t close. We don’t have a transaction that can close. So I want to be very clear: We can’t close this transaction … So, absent a substantial restructuring of this transaction — which Energy Transfer has … been very willing and … actually desiring to do — absent that, we don’t have a deal.” Apparently the deal as proposed by Warren, with a cash component, will be taxable in ways he didn’t plan–so he either wants Williams to accept a stock swap, or bail from the deal. Here’s what was said on yesterday’s phone conference…
Read More “ETE CEO Kelsey Warren Says Williams Merger “Can’t Close””