Willams Cos. (WMB) announced a restructuring under which it will
receive some $10 billion for its gas-pipeline and U.S. processing
assets, along with its stake in Williams Pipeline Partners LP
(WMZ), from Williams Partners LP (WPZ).
Moving the assets to its master limited partnership allow
Williams to simplify its structure and focus on natural-gas
exploration and production. Williams Partners will be substantially
bigger and "have significantly enhanced access to capital sources,"
said Williams Partners Chairman and Chief Executive Steve
Malcolm.
The restructuring will create one of the biggest natural-gas
partnerships in the country, with operations across the Gulf Coast,
Rocky Mountains and into the northeast.
Williams Partners is paying nearly $3.5 billion and issuing 203
million units--there are currently 52.8 million outstanding. That
will boost Williams' stake in the partnership to 80% from the
current 24%. Williams Partners will also assume some $2 billion in
debt through the deal. After it closes, Williams Partners intends
to purchase the rest of Williams Pipeline it won't already own.
Williams Partners said its risk will be reduced due to the
"substantial increase" in the size and proportion of fee-based cash
flows. It also expects to boost its quarterly distribution to
unitholders by 3.5% initially.
Meanwhile, Williams separately announced a $3 billion
debt-buyback effort.
The move will merge Williams Partners and Williams Pipeline
Partners, entities called master limited partnerships. MLPs are
tax-advantaged vehicles commonly used in the energy industry to own
stable, fee-producing infrastructure assets such as pipelines and
energy-processing plants.
The merged MLP, to be called Williams Partners, will be the
third-largest such business, behind Kinder Morgan Energy Partners
LP (KMP) and Enterprise Products Partners LP (EPD), by estimated
earnings.
MLPs pay out most of their earnings to their unit holders on a
regular schedule, making them a popular alternative to bonds for
individual investors, particularly wealthy investors looking to
minimize taxes on investment income.
Williams, Williams Partners and Williams Pipeline closed Friday
at $21.37, $30.79 and $23.35, respectively, and were inactive
premarket.
-By Kevin Kingsbury and Nathan Becker; Dow Jones Newswires;
212-416-2354; kevin.kingsbury@dowjones.com