WMB Williams Companies Inc

By Alison Sider 

Veteran pipeline dealmaker Kelcy Warren, chairman of Energy Transfer Equity, says life is too short for hostile deals.

Mr. Warren told The Wall Street Journal in an exclusive interview Thursday that was the lesson he took away after months of wrangling over his plan to buy rival pipeline giant Williams Cos.

The deal, initially valued at $33 billion, would have created a 100,000-mile network of oil-and-gas pipes, creating one of the largest systems of fuel-moving arteries around North America. But its failure doesn't mean Energy Transfer is out of the market.

Mr. Warren still has an acquisitive streak and said deals remain an important part of the strategy to growing his Dallas-based energy empire. Energy Transfer is now focused on finding "bolt-on" deals that complement existing assets, though bigger acquisitions aren't off the table.

"You know, I wouldn't mind elephant hunting like we did with Williams. I would actually be very receptive to that," he said. "But I will never ever do anything again in my career that's perceived as hostile. I will never do that."

Williams officials wouldn't comment for this article.

Williams rejected Energy Transfer's all-stock offer to buy the company in June 2015, but Energy Transfer kept pushing the takeover. Williams's board remained divided over the deal at a meeting last September; seven directors, including Chief Executive Alan Armstrong, were opposed to the deal. But the Williams board eventually approved Energy Transfer's advance in an 8-5 vote.

Only a few months later, Mr. Warren came to see the deal -- and particularly a $6 billion cash payment his company agreed to give Williams shareholders -- as a looming disaster that could ripple throughout his energy-infrastructure juggernaut. Oil prices crashed after the two companies signed their agreement, freezing pipeline companies out of capital markets that Energy Transfer needed to tap to borrow funds to close the deal.

Mr. Warren said Thursday that he tried to renegotiate with Williams in light of the energy bust but was "stiff-armed" by the company. Williams has maintained that it fully supported the merger, but Energy Transfer tried to torpedo the deal.

"When you get into a deal that you do not want to do at some point because the economics have changed, yet you're obligated contractually to do it, that's a disruption, a distraction, it's unhealthy," he said. "That's behind us now."

But Mr. Warren still has work to do convincing investors that under his leadership Energy Transfer will prosper with stockholders sharing in the largess, several analysts and investors have said.

In March, Energy Transfer issued preferred convertible shares to certain insiders, including Mr. Warren and other company officials, that effectively insulated them from any future dividend cuts the company might make. That move upset Williams and its shareholders, as well as many Energy Transfer investors.

Mr. Warren said the company has no plans to unwind that transaction, and blamed Williams for not allowing the securities to be offered to all Energy Transfer investors. He said Energy Transfer's cash distribution won't be cut, but that the company would consider offering similar shares to other investors.

The protracted drama hasn't damaged the company's reputation, Mr. Warren insists.

"I'm not concerned that people will not do business with us because they think we're not going to deal with them straight up. Not concerned at all," he said.

Write to Alison Sider at alison.sider@wsj.com

(END) Dow Jones Newswires

August 11, 2016 17:36 ET (21:36 GMT)

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