Energy Transfer Equity confirmed a proposal to merge with The Williams Companies in an all-equity transaction valued at $53.1 billion, including the assumption of debt and other liabilities.
ETE initially made its offer in a letter dated May 19, 2015, to Alan Armstrong, the CEO of Williams, followed by a letter dated June 11, 2015 sent to the Williams chairman of the board, and most recently confirmed its offer in a letter dated June 18, 2015 sent to the Williams board of cirectors.
Under its merger proposal, ETE would acquire all of the outstanding common stock of Williams at an implied price of $64 per Williams share, which represents a 32.4% premium to the Williams common share closing price as of June 19, 2015. The merger consideration would be in the form of common shares in an entity that would elect to be taxed as a C-corp (“ETE Corp”). Shares of ETE Corp would have the same economic attributes as ETE common units. The number of ETE Corp shares to be issued to Williams stockholders will be based on a fixed exchange ratio of 0.9358 ETE Corp shares for each Williams share, reflecting ETE’s offer of $64 per Williams share and ETE’s unit price of $68.39 as of June 19, 2015. This exchange ratio will be subject to adjustment for the previously announced two-for-one ETE unit split. ETE Corp would be publicly traded on the NYSE under the symbol “ETC.” The transaction would be tax-free to Williams stockholders and, following the merger, ETE Corp stockholders would receive Form 1099s as opposed to schedule K-1s for tax purposes.
ETE has made multiple attempts over an almost 6-month period to engage in meaningful, friendly dialogue with the senior management of Williams regarding a proposed merger. As a result of the announcement of the Williams and Williams Partners L.P. merger on May 13, 2015, ETE felt compelled to send its written offer to Williams in an effort to bring ETE’s interest to the attention of the Williams Board and to outline what ETE believes is a more compelling transaction than the proposed merger between Williams and WPZ.
In addition, ETE stated in its proposal that it did not foresee any regulatory impediments to a merger with Williams and that ETE would accept the regulatory risk related to the closing of the merger. Moreover, ETE has noted that there would be no requirement for an ETE unitholder vote, providing additional deal certainty to Williams stockholders. ETE’s offer is conditioned on the termination of the WPZ merger agreement pursuant to its terms.
Kelcy Warren, ETE’s Chairman, said “Generally, I have not been supportive of transactions that involve the issuance of ETE units given my belief that ETE units remain significantly undervalued. However, I believe that a combination of Williams’ assets with ETE will create substantial value that would not be realized otherwise. Therefore, I am a strong proponent of this transformative combination and support the issuance of a significant amount of ETE securities to complete the transaction. I am truly excited at the prospect of bringing together these two businesses under a common platform and creating additional value for every stakeholder.”