By Alison Sider and Dana Cimilluca
Natural-gas pipeline giant Williams Cos. has rejected an
unsolicited buyout offer worth $48 billion but is open to other
offers, the company said Sunday.
Williams didn't identify who made the takeover offer. A person
familiar with the matter said the suitor was Energy Transfer Equity
LP, based in Dallas. Energy Transfer's interest was earlier
reported by Bloomberg.
Williams said it declined an all-stock offer valued at $64 a
share, which is a 33% premium to where its shares closed on Friday.
The company has retained Barclays PLC and Lazard to pursue
alternatives, including a merger, a sale of the company or simply
continuing on its current path.
"The Williams Board carefully considered the unsolicited
proposal and determined that it significantly undervalues Williams
and would not deliver value commensurate with what Williams expects
to achieve on a stand-alone basis and through other growth
initiatives, including the pending acquisition of" Williams
Partners, the company said in a statement.
In May, Williams said it planned to absorb its subsidiary,
Williams Partners LP, in a $13.8 billion deal. At the time, the
company said that combining and simplifying its corporate structure
would make it more efficient and better able to expand in the
future.
On Sunday, Williams said the offer it rejected was contingent on
that simplification process being called off.
Shares of Williams Cos. have risen 7.8% this year to $48.34.
Shares of the partnership that Williams controls closed Friday at
$53.25, up 4.1% this year. Energy Transfer shares are up 19% this
year at $68.39.
Williams has said its consolidation deal likely would close
during the third quarter, giving the combined company an enterprise
value of $84 billion.
Companies that own pipelines and other energy infrastructure
have been somewhat insulated from the dramatic drop in the price of
oil and gas over the last year. That is because they tend to
operate based on fixed-fee, long-term contracts that pay the same
amount of money whether energy prices are high or low.
But Williams also is exposed to the plummeting price of some
fuel known as natural gas liquids, which include propane and
ethane. In addition to pipelines, Williams owns many
natural-gas-processing facilities, which earned slimmer margins
this year.
Analysts have been predicting that energy transportation and
storage companies would combine in a series of mergers and
acquisitions.
"It's game on for consolidation and empire building," said
Robert W. Baird analyst Ethan Bellamy.
Energy Transfer is a master limited partnership. The special
structure allows it to avoid most corporate taxes, while paying out
much of what it makes to shareholders. To boost those rich
dividends, MLPs must get bigger through acquisitions.
Energy Transfer got its start in 1995 with a tiny network of
less than 200 miles of pipelines that moved natural gas around
Texas. Since then, the company has created an intricate network of
70,000 miles of oil, gas and fuel pipelines around the country. In
more recent years, Energy Transfer expanded its web by acquiring
major interstate natural-gas pipeline operators, including Southern
Union Co. and Panhandle Eastern Pipeline Co.
Geographically, a deal with Williams would give Energy Transfer
a vastly expanded footprint. Williams has significant fuel-moving
capabilities in the Northeastern U.S., while most of Energy
Transfer's pipelines are located across the south and Midwest.
Williams's roots in moving fuel around North America go back to
1919, but it was the 1995 acquisition of Transco Energy Co. that
expanded its system to the U.S. East Coast and made it one of the
nation's largest natural-gas transporters. Today, Williams, based
in Tulsa, Okla., owns and operates 13,600 miles of pipelines across
North America.
Write to Alison Sider at alison.sider@wsj.com and Dana Cimilluca
at dana.cimilluca@wsj.com
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