Energy Transfer Equity Calls Off Williams Merger -- Update
June 29 2016 - 10:34AM
Dow Jones News
By Alison Sider
Energy Transfer Equity LP said Wednesday that it had terminated
its merger agreement with rival pipeline operator Williams Cos., a
deal valued at nearly $33 billion when it was signed last year.
The move was widely anticipated after a Delaware judge ruled on
Friday that Energy Transfer could back out, since its lawyers
couldn't deliver a necessary opinion on the deal's tax
treatment.
But the fight may not be over. Williams has said it doesn't
believe Energy Transfer has the right to terminate the deal, and
filed notice that it will appeal the judge's ruling. Its
shareholders voted in favor of the deal in a special meeting held
Monday, despite indications from Energy Transfer that it planned to
kill the agreement.
The deal the companies struck in September would have created a
100,000-mile network of pipelines. But buyer's remorse set in at
Energy Transfer as oil prices continued their slide, and pain in
the oil and gas sector spread to pipeline companies.
Kelcy Warren, Energy Transfer's chief executive, worried that
the $6 billion cash component of the deal would trigger a credit
ratings downgrade that would cascade throughout a network of
partnerships he controls.
Energy Transfer said earlier this year that it had discovered a
problem with the deal that could trigger unexpected taxes, and
warned that its lawyers wouldn't be able to deliver a legal opinion
that the merger would be tax-free. Williams sued in an effort to
hold Energy Transfer to the terms of the merger agreement, arguing
that its acquirer was just looking for an out.
The court sided with Energy Transfer, finding that the company's
lawyers were acting in good faith when they discovered the tax
issue. Obtaining the tax opinion from Energy Transfer's law firm
was a condition for the deal to close.
Williams said in a statement Wednesday that it will seek
monetary damages from Energy Transfer for its beaches. Williams has
said the deal's collapse would cost it between $4 billion and $10
billion in lost value for its shareholders.
Write to Alison Sider at alison.sider@wsj.com
(END) Dow Jones Newswires
June 29, 2016 10:19 ET (14:19 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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