Energy Transfer Equity to acquire William Cos for $33B

By Money Times

Sep 29, 2015 06:37 AM EDT

The Dallas-based Energy Transfer Equity LP has decided to buy Williams Cos in a $32.6-billion deal. The acquisition will pave the way for developing a huge 100,000 miles network of natural gas pipelines in the US.

Energy Transfer Equity has made this acquisition at a time, when the outlook for growth in the pipeline industry looks bleak. The Energy Transfer's offer of $43.50 a share was a 4.6 percent premium over the closing price of $42 on Friday.

Shares of both the companies fell 12 percent after the acquisition deal, which is marking the need for consolidation in the wake of the adverse conditions in oil field economics. The deal is expected to bring stability for the combined entity amid falling oil prices.

The previous offer of $48bn in June was turned down by Tulsa, Okla-based Willaims Cos. However, shares of both the company started moving southwards since then. The oil price was $60 a barrel in June and now dropped to $45.

Similarly, natural gas prices also eased to $2.70 from $3. Williams shares dropped 12 percent to $36.57 and Energy Transfer stock fell 13 percent to $20.29 on Monday. Natural gas prices were also reeling under pressure globally. The latest one was the second offer made by Energy Transfer Equity. 

The second offer is $15bn lower than the previous one. Williams Cos had also hired advisers on an auction that involved other bidders as well. The exchange ratio of the deal involved Energy Transfer's two for one stock split in July. William shareholders will have another option of opting for part of the payment in cash also. However, this option has a capitalization of $6.05 billion. 

After the acquisition, Energy Transfer Equity will emerge as the third largest energy network in North America and one among the global top-five in the energy sector.

Alan Armstrong, President and CEO at Williams Cos, said: "As a combined company, we will have enhanced prospects for growth. We're better able to connect our customers to more diverse markets. We'll have more stability in an environment of low commodity prices."

Both the companies say that all the shareholders would be benefited from cash flow diversification. The cash flows are expected to rise from the association with ownership including Energy Transfer partners and Sunoco Logistics Partners. 

The shareholders of Williams Cos will get a one-time special dividend of 10cents per share. The shareholders will get this special dividend soon after the acquisition deal. After the acquisition, William Cos name will be continued and there wouldn't be any change in headquarters located in Okla. 

Drilling companies are slowing down their operations as the continuous decline in oil price is impacting their performance. Adding to this, the widening layoffs at oil field services companies are causing disturbance to oil rigging activity.

Many energy infrastructure companies are under pressure to fulfill the promises made to investors. Several companies are actively considering the options of going for new projects or buying competitors in order to set the ball rolling.

Williams Cos gives Energy Transfer more access to the northeastern part of the US. It'll help Energy Transfer Equity to meet the requirement of increased output at Marcellus Shale in Pennsylvania to New York and New England. The 10,000-mile network of Williams Cos is the company's flagship and a critical link between Texas and the Northeast.

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