Williams Believes Glass Lewis’ Recommendation
Fails to Reflect Significant Premium Encompassed Within Agreed
Stock and Cash Consideration, Meaningful Participation in Upside of
Combined Company, Value Certainty Provided by Cash Component and
Risks Associated with Standalone Williams
Williams Urges Stockholders to Vote “FOR” the
Williams and ETE Transaction
The Williams Companies, Inc. (NYSE: WMB) (“Williams”) today
announced that three out of four of the leading proxy advisory
firms – Institutional Shareholder Services (“ISS”), Egan-Jones
Proxy Services (“Egan-Jones”) and Pensions & Investment
Research Consultants Limited (“PIRC”), Europe's largest independent
corporate governance and shareholder advisory consultancy –
recommend that Williams stockholders vote “FOR” the proposed
transaction with Energy Transfer Equity, L.P. (NYSE: ETE) (“ETE”)
at Williams’ special meeting of stockholders scheduled for Monday,
June 27, 2016.
Williams also today noted that it believes Glass, Lewis &
Co. (“Glass Lewis”) reached the wrong conclusion in recommending
against the proposed transaction. While Williams appreciates that
Glass Lewis expects that the “greater scale and asset
diversification provided by the proposed transaction could
potentially position the Company to better manage the current
challenging commodity price environment, including by providing
more diversified cash flows and a wide range of potential strategic
opportunities,” the Glass Lewis recommendation fails to reflect the
potential upside in the transaction, the value certainty provided
by the cash component and the risks associated with a standalone
Williams.
Other key observations regarding Glass Lewis’ recommendation
include:
- In failing to assess the value of
consideration being offered to Williams stockholders in the
transaction, Glass Lewis ignores the significant acquisition
premium being offered to those stockholders. If Williams
stockholders were to reinvest the cash consideration of $8.10 per
share in ETE stock at the current ETE share price (as of June 17,
2016), Williams stockholders would own 74% of the combined company,
significantly in excess of Williams’ proportionate value
contribution.
- Glass Lewis mistakenly cites a revised
aggregate pre-tax annual corporate synergy total of $126 million in
the base case. While the expected commercial synergies have been
revised to $126 million in the base case and more than $500 million
in the upside case, Glass Lewis’ analysis omitted the fact that
there are also additional significant material cost synergies that
the companies expect to realize through the transaction. The base
case of commercial synergies is consistent with the range of
potential synergies considered by the Williams Board in approving
the merger and by Williams’ financial advisors when performing the
analyses and arriving at their opinions.
- Glass Lewis also improperly assumes
that Williams’ dividend will continue at or near the current rate
in its flawed analysis of the cash to be received by Williams
stockholders in the two scenarios.
- Williams stockholders have a guaranteed
$8.10 per share in cash in the transaction. While dividends at both
ETE and standalone Williams are expected to be eliminated or
significantly reduced, even at Williams’ historical dividend rate
(without the expected elimination or significant reduction) it
would take more than 12 quarters of dividends to equal the upfront
cash in the transaction. With the expected elimination or
significant reduction of the Williams dividend, the time frame
elongates substantially.
- While Glass Lewis recognizes that the
combined company will have greater cash flow diversification,
expanded options to manage debt and other benefits over a
standalone Williams, its recommendation appears solely focused on
higher initial leverage metrics at ETE. The analysis is flawed and
should incorporate other factors when evaluating relative credit
profiles:
- While Williams is focused on continuing
to improve its credit profile, current leverage metrics are higher
than its targeted level, and there is risk for a credit rating
downgrade if the merger is not completed. Williams’ consolidated
current debt / 2016E EBITDA is ~6x.
- Williams would also continue to face
significant customer concentration risk. Notably, Chesapeake
accounted for 18% of Williams’ 2015 revenues.
- In addition to an expected elimination
or significant reduction of the Williams dividend, Williams may
also need to supplement debt reduction plans as needed by asset
sales, potential IDR waivers and equity issuances.
- ETE indicated in the S-4 that it
expects that the combined company will have the ability to manage
HoldCo leverage levels to approximately 3.7x by 2018. In addition,
anticipated consolidated EBITDA is projected to increase by
approximately $3 billion, or 29% between 2016 and 2018.
ISS, EGAN-JONES AND PIRC RECOMMEND THAT
WILLIAMS STOCKHOLDERS VOTE “FOR” THEMERGER AGREEMENT WITH
ETE
Williams is pleased that ISS, Egan-Jones and PIRC have endorsed
the Williams and ETE transaction. The Company believes that the
recommendations further support Williams’ view that adopting the
merger agreement with ETE is in the best interests of Williams
stockholders.
In its recommendation, ISS stated, among other things, that:
- “Given there are two large shareholders
on the Williams board, and the entire board’s commitment to doing
the right thing for shareholders (as perhaps most evident in the
protections, as well as the economic terms, it negotiated in the
first place), it seems wiser to preserve the value of the contract
itself, and the potential value creation opportunity of the
combined company, by voting FOR the transaction, and to entrust the
board with evaluating and negotiating any prudent revisions to
terms.”
- “A vote FOR the proposed transaction is
warranted, despite the additional strains brought on by a continued
decline in commodity prices, given the significant cash component
of the consideration payable on closing, the more diversified
customer base of the combined company, the 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 – particularly as
the oil and gas sector recovers – than Williams on a standalone
basis.”
In its recommendation, Egan-Jones
stated, among other things, that:
- “…Egan Jones views the proposed
transaction to be a desirable approach in maximizing shareholder
value. After careful consideration, we believe that approval of the
merger agreement is in the best interests of the Company and its
shareholders and its advantages and opportunities outweigh the
risks associated to the transaction. As of the Record Date, there
were 750,569,517 shares of common stock outstanding. We recommend a
vote “FOR” this Proposal.”
In its report, Glass, Lewis, too,
recognizes the ability for the combined company to manage leverage
solely through dividend reductions and the greater options
available to it over a standalone Williams, stating:
- “ETE’s projections do not require any
additional asset sales to delever and the combined company would
likely have significant additional opportunities to improve its
financial position than WMB on a stand-alone basis.”
THE WILLIAMS BOARD CONTINUES TO
RECOMMENDTHAT STOCKHOLDERS VOTE "FOR" THE MERGER
AGREEMENT
As previously stated, key highlights of the transaction
include:
- Enhanced scale, scope of operations
and M&A opportunities: The transaction will create the
largest midstream franchise in North America and the Board believes
that the combined company will be better positioned to compete in a
dynamic midstream sector and a challenging commodity price
environment.
- Significant synergies: In
addition to the significant available cost synergies, the combined
company will benefit from commercial synergies that are expected to
result in increased EBITDA by 2020 of more than $100 million (base
case) to more than $500 million (upside price case).
- Complementary geographic
footprint: ETE and Williams have complementary geographic
footprints, which the Board believes will allow the combined
company to be able to better serve customers through the entire
value chain across all major basins.
- Upside exposure: The Board
expects that, as market conditions improve, Williams stockholders
will be able to benefit from the upside in the combined company’s
significant and diverse set of growth opportunities. The Board also
expects upside to the combined company’s commercial synergy targets
as commodity prices improve and demand for natural gas, NGL and
crude supply increases. As disclosed in the Recent Developments
section of the S-4 (under Updated Financial Forecasts of ETC),
anticipated consolidated EBITDA is projected to increase by
approximately $3 billion, or 29% between 2016 and 2018, while the
unconsolidated leverage metric of the combined company is expected
to decline from 6.8x HoldCo debt / EBITDA to 3.7x over the 2016 to
2018 timeframe.
- Financial strength: The Board
believes that the combined company will be well-positioned to
cost-effectively delever and strengthen the balance sheet over
time.
- Certainty of value: The cash
component of the merger consideration is equivalent to exchanging
18% of Williams shares for cash at a valuation of $43.50 per share.
This cash component represents ~29% of the current overall value of
the merger consideration (as of June 17, 2016) and provides a
substantial value cushion in the current commodity downturn.
The transaction also reduces key risks Williams would face as a
standalone company:
- The Board believes that the combination
spreads customer concentration risk across a much broader
base, and provides more opportunities and flexibility to negotiate
“win-win” solutions with Williams’ large and important customer,
Chesapeake.
- The Board believes that the merger also
reduces the risk that Williams’ access to capital may be
impaired as a result of customer credit issues. The combined
company will have more levers to finance its capital plan,
including four MLP financing vehicles.
ACT NOW BY ELECTING YOUR MERGER
CONSIDERATION AND VOTING “FOR” THE MERGER AGREEMENT ON THE ENCLOSED
WHITE PROXY CARD
The Board encourages stockholders to act today, not only to vote
“FOR” the Merger Agreement, but to also elect the form of
consideration they wish to receive in the merger: ETC shares, cash,
or a mix of the two, subject to proration, as described in the
proxy statement. Stockholders’ financial advisors (bank or broker)
can assist in making this election. Regardless of the merger
consideration election, the total amount of cash to be paid will be
limited to and fixed at approximately $6.05 billion. Stockholders
who do not elect cash may not receive any cash, and similarly,
stockholders who fail to make an election by the June 24th election
deadline may not receive any cash.
Voting now is extremely important, no matter how many or how few
shares are owned. Failing to vote has the same effect as a vote
against the transaction. Please take a moment to vote “FOR” the transaction today - by telephone,
by Internet or by signing, dating and returning the WHITE proxy
card.
The special meeting of stockholders will be held on Monday, June
27, 2016 at 9:00 a.m. (Central Daylight Time) at the Williams
Resource Center Theater, One Williams Center, Tulsa, Oklahoma.
Williams’ stockholders of record as of the close of business on May
19, 2016 are entitled to vote at the meeting.
YOUR VOTE IS IMPORTANT!
If you have questions or need assistance in
voting your shares, please contact our proxy
solicitor:Mackenzie Partners, Inc.105 Madison AvenueNew York,
NY 10016(212) 929-5500 (Call Collect)Call Toll-Free (800)
322-2885Email: proxy@mackenziepartners.com
Permission to use quotations was neither sought nor obtained
Williams (NYSE: WMB) is a premier provider of large-scale
infrastructure connecting North American natural gas and natural
gas products to growing demand for cleaner fuel and feedstocks.
Headquartered in Tulsa, Okla., Williams owns approximately 60
percent of Williams Partners L.P. (NYSE: WPZ) (“WPZ”), including
all of the 2 percent general-partner interest. WPZ is an
industry-leading, large-cap master limited partnership with
operations across the natural gas value chain from gathering,
processing and interstate transportation of natural gas and natural
gas liquids to petchem production of ethylene, propylene and other
olefins. With major positions in top U.S. supply basins and also in
Canada, WPZ owns and operates more than 33,000 miles of pipelines
system wide – including the nation’s largest volume and fastest
growing pipeline – providing natural gas for clean-power
generation, heating and industrial use. WPZ’s operations touch
approximately 30 percent of U.S. natural gas.
Forward-looking Statements
This communication may contain forward-looking statements. These
forward-looking statements include, but are not limited to,
statements regarding the merger of ETE and Williams, the expected
future performance of the combined company (including expected
results of operations and financial guidance), and the combined
company's future financial condition, operating results, strategy
and plans. Forward-looking statements may be identified by the use
of the words "anticipates," "expects," "intends," "plans,"
"should," "could," "would," "may," "will," "believes," "estimates,"
"potential," "target," "opportunity," "designed," "create,"
"predict," "project," "seek," "ongoing," "increases" or "continue"
and variations or similar expressions. These statements are based
upon the current expectations and beliefs of management and are
subject to numerous assumptions, risks and uncertainties that
change over time and could cause actual results to differ
materially from those described in the forward-looking statements.
These assumptions, risks and uncertainties include, but are not
limited to, assumptions, risks and uncertainties discussed in the
Registration Statement on Form S-4 which was declared effective by
the U.S. Securities and Exchange Commission (the “SEC”) on May 25,
2016 (the “Form S-4”) and in the most recent Annual Report on Form
10-K for each of ETE, Energy Transfer Partners, L.P. (NYSE: ETP)
(“ETP”), Sunoco Logistics Partners L.P. (NYSE: SXL) (“SXL”), Sunoco
LP (NYSE: SUN) (“SUN”), Williams and WPZ filed with the SEC and
assumptions, risks and uncertainties relating to the proposed
transaction, as detailed from time to time in the Form S-4 and in
ETE’s, ETP’s, SXL’s, SUN’s, Williams’ and WPZ’s filings with the
SEC, which factors are incorporated herein by reference. Important
factors that could cause actual results to differ materially from
the forward-looking statements we make in this communication are
set forth in the Form S-4 and in other reports or documents that
ETE, ETP, SXL, SUN, Williams and WPZ file from time to time with
the SEC include, but are not limited to: (1) the ultimate outcome
of any business combination transaction between ETE, Energy
Transfer Corp LP (“ETC”) and Williams; (2) the ultimate outcome and
results of integrating the operations of ETE and Williams, the
ultimate outcome of ETE’s operating strategy applied to Williams
and the ultimate ability to realize cost savings and synergies; (3)
the effects of the business combination transaction of ETE, ETC and
Williams, including the combined company's future financial
condition, operating results, strategy and plans; (4) the ability
to meet the closing conditions to the transaction, including
Williams stockholder approval, on a timely basis or at all; (5) the
reaction of the companies’ stockholders, customers, employees and
counterparties to the proposed transaction; (6) diversion of
management time on transaction-related issues; (7) unpredictable
economic conditions in the United States and other markets,
including fluctuations in the market price of ETE common units and
ETC common shares; (8) the ability to obtain the intended tax
treatment in connection with the issuance of ETC common shares to
Williams stockholders; and (9) the ability to maintain Williams’,
WPZ’s, ETP’s, SXL’s and SUN’s current credit ratings. All
forward-looking statements attributable to us or any person acting
on our behalf are expressly qualified in their entirety by this
cautionary statement. Readers are cautioned not to place undue
reliance on any of these forward-looking statements. These
forward-looking statements speak only as of the date hereof.
Neither ETE nor Williams undertakes any obligation to update any of
these forward-looking statements to reflect events or circumstances
after the date of this communication or to reflect actual
outcomes.
Additional Information
This communication does not constitute an offer to buy or
solicitation of an offer to sell any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended. This communication relates to a
proposed business combination between ETE and Williams. In
furtherance of this proposed business combination and subject to
future developments, ETE, ETC and Williams have filed a
registration statement on Form S-4 with the SEC and a proxy
statement/prospectus of Williams and other documents related to the
proposed business combination. This communication is not a
substitute for any proxy statement, registration statement,
prospectus or other document ETE, ETC or Williams may file with the
SEC in connection with the proposed business combination. The
registration statement was declared effective by the SEC on May 25,
2016. INVESTORS AND SECURITY HOLDERS OF ETE AND WILLIAMS ARE URGED
TO READ THE REGISTRATION STATEMENT, PROXY STATEMENT/PROSPECTUS AND
OTHER DOCUMENTS THAT HAVE BEEN OR MAY BE FILED WITH THE SEC
CAREFULLY AND IN THEIR ENTIRETY AS THEY CONTAIN OR WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED BUSINESS COMBINATION.
Definitive proxy statement(s) were mailed to stockholders of
Williams beginning on May 25, 2016 and amended by Amendment No. 1
on June 3, 2016 and by Amendment No. 2 on June 17, 2016. Investors
and security holders may obtain free copies of these documents and
other documents filed with the SEC by ETE, ETC and Williams through
the website maintained by the SEC at http://www.sec.gov. Copies of
the documents filed by ETE and ETC with the SEC will be available
free of charge on ETE’s website at www.energytransfer.com or by
contacting Investor Relations at 214-981-0700 and copies of the
documents filed by Williams with the SEC will be available on
Williams’ website at investor.williams.com.
ETE and its directors, executive officers and other members of
management and employees may be deemed to be participants in the
solicitation of proxies in respect of the proposed transaction.
Information regarding the directors and officers of ETE’s general
partner is contained in ETE’s Annual Report on Form 10-K filed with
the SEC on February 29, 2016 (as it may be amended from time to
time). Additional information regarding the interests of such
potential participants is included in the proxy
statement/prospectus and other relevant documents filed with the
SEC. Investors should read the proxy statement/prospectus carefully
before making any voting or investment decisions. You may obtain
free copies of these documents from ETE using the sources indicated
above.
Williams and its directors, executive officers and other members
of management and employees may be deemed to be participants in the
solicitation of proxies in respect of the proposed transaction.
Information regarding the directors and officers of Williams is
contained in Williams’ Annual Report on Form 10-K filed with the
SEC on February 26, 2016 (as it may be amended from time to time).
Additional information regarding the interests of such potential
participants is included in the proxy statement/prospectus and
other relevant documents filed with the SEC. Investors should read
the proxy statement/prospectus carefully before making any voting
or investment decisions. You may obtain free copies of these
documents from Williams using the sources indicated above.
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version on businesswire.com: http://www.businesswire.com/news/home/20160620005750/en/
The Williams Companies, Inc.Investor Relations:John Porter,
918-573-0797orBrett Krieg, 918-573-4614orMedia Relations:Lance
Latham, 918-573-9675orJoele Frank, Wilkinson Brimmer KatcherDan
Katcher, Andrew Siegel or Dan Moore, 212-355-4449
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