Energy Merger Hits Sour Note -- WSJ
June 18 2016 - 03:03AM
Dow Jones News
By Anne Steele
Williams Cos. on Friday said the potential financial benefit
expected from its pending merger with Energy Transfer Equity LP
would be 94% lower than the companies initially projected, the
latest hurdle to the troubled deal.
The energy companies now estimate merger-related synergies of
$126 million annually by 2020, down dramatically from the $2
billion annually initially projected by Energy Transfer when the
deal was struck in September. At the time, the deal was valued at
around $33 billion.
Williams said the new estimate stemmed from integration planning
by both companies in early 2016. Even if market conditions return
to July 2015 levels, merger-related synergies would only be $543
million, Williams said.
The Tulsa, Okla.-based company said it would file an amended
disclosure to its merger-agreement proxy statement in connection
with settling litigation -- unrelated to the deal -- by a
stockholder.
Also Friday, Williams said its board declared a special dividend
of 10 cents a share to stockholders upon closing of the deal. But
the merger, which shareholders are scheduled to vote on June 27,
remains on shaky ground.
Energy Transfer has been aiming to restructure or escape the
planned acquisition as low commodities prices spread pain through
the energy sector. The two pipeline companies are also in a legal
tussle as Williams seeks to undo a convertible-share issue by
Energy Transfer to help fund the deal and force Energy Transfer to
proceed with the agreement.
Earlier this week, Williams said proxy advisory firm
Institutional Shareholder Services is recommending shareholders
vote in favor of the acquisition despite pressures from low
commodities prices.
ISS noted the deal's significant cash component, the combined
company's more diversified customer base, and shareholders'
opportunity to have a nearly 50% equity stake in a merged company
that is seen as having stronger cash flow than Williams would have
on its own.
In a letter Wednesday urging its shareholders to support the
deal, Williams said the merger would lead to "significant
synergies" while reiterating its dividend could be cut if the deal
isn't completed. In a stand-alone scenario, the company said, its
efforts to improve its balance sheet also would likely include
further capital-spending cuts, asset sales and equity issuance.
Shares of Williams rose 1.8% to $22.53 in 4 p.m. ET trading
Friday in New York, while Energy Transfer shares edged up 0.2% to
$12.99.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
June 18, 2016 02:48 ET (06:48 GMT)
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