Energy Transfer Partners And Equity Offer Complicated Value
Stephen Simpson, CFA • 24 Comments
Stephen Simpson, CFA • 24 Comments
Mon, Jun. 20, 3:28 PM
- Energy Transfer Equity (ETE -6.2%) CEO Kelcy Warren feared that pushing ahead with a merger with Williams Cos. (WMB +0.2%) after oil prices plunged would cause a credit ratings downgrade and cause an "implosion," former CFO Jamie Welch said today during a Delaware Chancery Court trial over the faltering merger.
- Welch also said Warren was “uninterested in restructuring” the deal, brushing aside offers from WMB to revise the merger to address questions about whether the IRS would view the combination as properly freeing investors' tax liabilities.
- On the equity offering that WMB says was designed in part to unfairly increase Warren’s payout on units he held in some ETE’s partnerships, Welch said he opposed setting up the offering that way, adding that Warren did not receive a salary or bonus and relied on the payments.
- The judge is hearing evidence to determine whether ETE or WMB violated the merger agreement in ways that make it impossible to close the deal, once valued at $32B.
Mon, Jun. 20, 2:27 AM
- After months of squabbling, Williams Cos. (NYSE:WMB) and Energy Transfer (NYSE:ETE) will face off today in a Delaware courtroom, where top lawyers will go toe-to-toe analyzing the fine print of their 400-page merger agreement.
- While both sides accuse each other of breaching the contract, Energy Transfer hopes the judge will find violations that are serious enough to kill the deal.
Fri, Jun. 17, 12:46 PM
- Williams Cos. (WMB +1.6%) files a presentation that says the potential financial benefit expected from its pending merger with Energy Transfer Equity (ETE +0.1%) could be 94% lower than initial projections, the latest evidence that the deal is on shaky ground.
- The companies now estimate merger-related synergies of $126M/year by 2020, far lower than $2B-plus in annual synergies initially projected by ETE when the takeover deal was struck in September; even if market conditions return to July 2015 levels, merger-related synergies would equal only $543M.
- The new estimate is a result of the "joint integration planning process in early 2016” by both companies, according to the presentation.
- Also, WMB's board declares a $0.10/share special dividend to stockholders upon closing of the deal.
Wed, Jun. 15, 12:42 PM
- Williams Cos. (WMB +5.2%) says proxy advisory firm ISS is recommending that shareholders vote in favor of Energy Transfer Equity's (ETE +1.2%) takeover bid.
- Among the factors cited by ISS are the significant cash component of the bid, the more diversified customer base of the combined company, upside exposure to significant growth opportunities such as Lake Charles LNG, and the opportunity to own nearly half the equity in a combined company anticipated to have much stronger free cash flow than WMB on a stand-alone basis.
- In its own letter urging support for the deal, WMB says the merger would lead to "significant synergies" and reiterates that it could cut the dividend if the pending deal is not completed.
- WMB shareholders are set to vote on the troubled merger deal - valued at ~$33B when it was announced - on June 27.
Thu, Jun. 9, 3:20 PM
- Williams Cos. (WMB +0.7%) is higher and Energy Transfer Equity (ETE -3.3%) is sharply lower after the Federal Trade Commission approves their merger with conditions.
- The FTC says the companies must agree to sell WMB's 50% stake in the Gulfstream Natural Gas System, an interstate pipeline that serves Florida, particularly the state's electric power companies.
- The merger, originally valued at ~$38B, may not close in H1 as scheduled because the agreement with the FTC is subject to a 30-day public comment period, which will end on July 11.
Wed, Jun. 8, 10:47 AM
- While committing to pay a $0.64/share dividend for the current quarter, Williams Cos. (WMB +0.1%) warns it would cut its dividend in the next quarter if a deal to sell itself to Energy Transfer Equity (ETE +2.2%) falls through.
- WMB, which reiterates its commitment to closing the ETE deal, says it has not determined the amount of any dividend cut but that it "could be material."
- WMB shareholders are scheduled to vote June 27 on the deal, which ETE has been trying to restructure or exit altogether.
Tue, Jun. 7, 3:22 PM
- The mayor of Tulsa, Okla., home to the headquarters of Williams Cos. (WMB +1.8%), says Energy Transfer Equity's (ETE +0.9%) proposed takeover has "no business or industrial logic" and may be “tragic” for the city and WMB’s shareholders.
- "My city will bear a very substantial cost for a transaction that destroys value for the shareholders it is supposed to benefit," Bartlett says in his letter.
- Mayor Bartlett's plea comes less than a week after three former WMB CEOs raised similar concerns in their own letter to stockholders.
- A vote against the deal would preserve WMB's independence and provides “the opportunity for substantial value accretion once the overhang of this transaction is gone," the CEOs said.
Fri, May 27, 6:41 PM
- Williams Cos. (NYSE:WMB) tells Energy Transfer Equity (NYSE:ETE) it is open to considering a new offer that would amend the terms of their proposed merger in an effort to end the stalemate between the two companies, Reuters reports.
- WMB would consider a proposal that would replace the $6B cash portion of the ~$20B deal with shares in the acquisition vehicle that ETE will set up for the deal, according to the report.
- WMB's latest tactical move aims to test ETE's statement earlier this month that it would consider restructuring the deal.
- Time is running out for renegotiations: The two sides are set to face off in Delaware's chancery court on June 20 over tax issues and claims by both companies that the other has broken their contact.
Fri, May 27, 5:39 PM
Fri, May 27, 8:16 AM
- Energy Transfer Equity (NYSE:ETE) files a counterclaim in the recent lawsuit brought by Williams Cos. (NYSE:WMB), asking the Delaware Court of Chancery to rule that it can "immediately terminate” the merger agreement between the two companies.
- ETE says WMB broke the agreement by, among other things, refusing to cooperate with ETE’s efforts to finance the deal and failing to make “reasonable best efforts” to complete it; having breached the merger terms, ETE says WMB should pay it a $1.48B breakup fee.
- It’s no surprise, but ETE has now "confirmed the fact that they want to get out” of the merger, Bloomberg's Michael Kay says. “Williams isn’t going to back off, and Energy Transfer wants out of the current deal structure now.”
- ETE +1.9%, WMB +0.6% premarket.
Wed, May 25, 3:57 PM
- Williams Cos. (WMB -3.9%) says the SEC has declared effective Energy Transfer Equity's (ETE -9.6%) S-4 registration statement, clearing WMB to mail its final proxy statement and schedule a shareholder vote for June 27 on its $33B merger with ETE.
- ETE says the companies have agreed to a trial to be held June 20 and June 21 to determine whether the deal can close with a tax opinion from Latham & Watkins that the contribution of Williams’ assets to ETE should qualify as a 721 exchange.
- Recent share price action indicates a higher likelihood that WMB will be able to hold ETE to the merger; the gap between WMB's trading price and the value of the cash-and-stock deal has narrowed by more than half over the past week, from nearly $8/share to less than $4/share.
- Now read Yes, Williams Cos. really wants Energy Transfer deal to go through
Wed, May 25, 2:00 PM
Mon, May 16, 3:33 AM
- Energy Transfer Equity (NYSE:ETE) says the recent litigation announced by Williams Cos. (NYSE:WMB) to prevent the two from ending their merger deal will result in a delay in the buyout.
- Williams filed another lawsuit against Energy Transfer Equity in a Delaware court on Saturday, this time to prevent the latter from terminating its agreement or avoiding its obligations in the event it fails to obtain a key tax opinion.
- Previously: Williams files suit to prevent Energy Transfer from ending merger deal (May. 14 2016)
Sat, May 14, 7:07 AM
- Williams Cos. (NYSE:WMB) says it filed a lawsuit yesterday in Delaware against Energy Transfer Equity (NYSE:ETE) to prevent ETE from terminating its merger agreement or avoiding its obligations in the event it fails to obtain a key tax opinion.
- WMB's board says it still supports the merger announced last September, even as it alleges that ETE has breached the agreement through a pattern of delay and obstruction designed to circumvent its contractual commitments.
- ETE CEO Kelcy Warren said last week that his company cannot close the deal without substantial changes.
- Now read Is the Energy Transfer-Williams deal dead? Short interest says no
Wed, May 11, 7:27 PM
- Bernstein analysts initiate several midstream and pipeline MLPs, estimating that less than 7% of MLPs $70B in service revenues are at risk in a $40/bbl oil environment; oil production volumes will likely fall this year, but midstream pipeline plays will mostly be unaffected, the firm says.
- On the other hand, the firm sees less long-term upside to MLPs than many investors expect, as after next year existing and in-progress gas and crude infrastructure will be sufficient to handle forward production through 2025.
- Bernstein prefers Enterprise Products Partners (NYSE:EPD) because of its significant committed market-based projects, and Williams Partners (NYSE:WPZ) and Williams Cos. (NYSE:WMB) on the belief they have been unfairly punished due to expected dividend cuts; the firm rates EPD, WPZ and WMB at Outperform.
- Bernstein ranks Kinder Morgan (NYSE:KMI), Spectra Energy (NYSE:SE), Spectra Energy Partners (NYSE:SEP), Energy Transfer Partners (NYSE:ETP), Energy Transfer Equity (NYSE:ETE), Cheniere Energy (NYSEMKT:LNG) and Cheniere Energy Partners (NYSEMKT:CQP) at Market Perform; the only name rated Underperform is Sunoco Logistics (NYSE:SXL).
- ETFs: AMLP, AMJ, KYN, YMLP, TYG, KYE, SRV, CEM, MLPI, NML, FEN, NTG, KMF, MLPA, EMLP, FMO, AMZA, FEI, JMF, SRF, CBA, MLPG, MLPN, GMZ, MLPX, GER, EMO, MLPY, TTP, CTR, MLPS, CEN, ZMLP, SMM, DSE, FPL, AMU, MIE, YMLI, JMLP, ENFR, ATMP, MLPW, MLPC, IMLP
Thu, May 5, 12:38 PM
- "We can't close this deal," Energy Transfer Equity (ETE +6.4%) CEO Kelcy Warren says of the takeover of Williams Cos. (WMB +3.9%) without the tax opinion that would deem the transaction an exchange that frees shareholders from tax liabilities.
- "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," Warren said in today's earnings conference call, adding that ETE would be open to a deal that would remove the cash portion of its cash-and-stock bid for WMB.
- ETE general counsel Thomas Mason said on the call that adviser Latham & Watkins had looked for a solution to the tax problem but had failed to find one, and legal advisers reached the same conclusion; he said either party could walk away from the deal after a June 28 deadline, but that ETE is "not focused" on that right now.
- Also: ETP +8.9%, WPZ +3.4%.
- Now read Energy Transfer nixes Williams proposals to resolve tax issues
Energy Transfer Equity LP provides natural gas pipeline transportation and transmission services. The company operates its business in seven segments: Interstate Transportation and Storage, Midstream, NGL Transportation and Services, Retail Marketing, Investment in Sunoco Logistics, Investment... More
Sector: Basic Materials
Industry: Oil & Gas Pipelines
Country: United States
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