Energy Transfer Equity (ETE) persevered in its nine-month effort to acquire fellow pipeline giant Williams, with the buyer agreeing to pay $37.7 billion for control of pipelines and plants that handle roughly 33% of U.S. natural gas demand.
Williams investors will get $43.50 a share either in cash or stock in Energy Transfer Corp., an affiliate of Energy Transfer Equity, Kallanish Energy understands.
Williams has canceled its May offer to buy all stock it doesn’t own in its affiliate, Williams Partners. The $43.50/share price represents a 4.6% premium to the Williams closing price on Sept. 25.
The deal ends a nine-month gestation period fronted by Dallas billionaire Kelcy Warren that became public in June, when Williams rejected Energy Transfer’s first offer as too low, and began seeking other suitors for the company.
Williams’ biggest asset, both literally and figuratively, is Transco, the largest U.S. gas pipeline system. It connects the Marcellus Shale/Appalachian Basin to populous U.S. markets. Williams has contracts underwriting at least $2.5 billion of expansion to Transco, according to the company’s May investor presentation. Its lines connect some Energy Transfer businesses.
“Williams adds scale, complimentary assets that enhance services to producers, synergies and significant potential commercial growth opportunities,” Elvira Scotto, an analyst for RBC Capital Markets, wrote in a June 22 note to clients.
The transaction ranks among the largest in the North American pipeline industry, which last year saw Kinder Morgan consolidate its partnership assets into one company through transactions with an enterprise value of more than $40 billion. Kinder Morgan’s market value is now about $67 billion.
Energy Transfer Equity and Williams are poised to become one of the top-six largest U.S. energy companies. The two companies had a combined market value as of September 18 of more than $60 billion. Williams will pay a $428 million termination fee to the partnership, according to a statement.
Energy Transfer announced June 21, it had offered $48 billion in stock for Williams. After rejecting the offer, Williams began taking bids in a process handled by Barclays and Lazard. Energy Transfer participated in the auction in July.
Energy Transfer’s initial offer depended on Williams abandoning a consolidation of its partnership the company had announced in May. Williams had proposed buying the rest of Williams Partners LP units it doesn’t already own for $14 billion.
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