Anticipated Commercial Synergies Exceed $2
Billion of Incremental EBITDA by 2020
Up to $400 Million of Additional Cost
Savings Expected from the Implementation of ETE’s Shared Service
Model
Williams’ Stockholders Can Elect to Receive
Shares Issued by New ETE C-corp and/or Cash, Subject to Proration
If Either is Oversubscribed
Transaction is Immediately Accretive to Cash
Flow and Distributions for Both ETE and WMB
Williams Partners L.P. (WPZ) to Retain Its
Name and Remain Headquartered in Tulsa
Energy Transfer Equity, L.P. (NYSE:ETE) (“ETE”) and The Williams
Companies, Inc. (NYSE:WMB) (“Williams” or “WMB”) today announced a
business combination transaction valued at approximately $37.7
billion, including the assumption of debt and other liabilities.
This announcement follows the termination of the previously agreed
merger agreement between WMB and Williams Partners L.P. (“WPZ”).
The business combination between ETE and WMB was approved by the
Boards of Directors of both entities. The combination will create
the third largest energy franchise in North America and one of the
five largest global energy companies. The combination will also
benefit customers by enabling further investments in capital
projects and efficiencies that would not be achievable absent the
transaction.
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Under the terms of the transaction, Energy Transfer Corp LP
(“ETC”), an affiliate of ETE, will acquire Williams at an implied
current price of $43.50 per Williams share. Williams’ stockholders
will have the right to elect to receive as merger consideration
either ETC common shares, which would be publicly traded on the
NYSE under the symbol “ETC”, and / or cash. Elections to receive
ETC common shares and cash will be subject to proration. Cash
elections will be prorated to the extent they exceed $6.05 billion
in the aggregate and stock elections will be prorated to the extent
the full $6.05 billion cash pool is not utilized. Williams
stockholders electing to receive stock consideration will receive a
fixed exchange ratio of 1.8716 ETC common shares for each share of
WMB common stock, before giving effect to proration. If all
Williams’ stockholders elect to receive all cash or all stock, then
each share of Williams common stock would receive $8.00 in cash and
1.5274 ETC common shares. In addition, WMB stockholders will be
entitled to a special one-time dividend of $0.10 per WMB share to
be paid immediately prior to the closing of the transaction. The
special one-time dividend is in addition to the regularly scheduled
WMB dividends to be paid before closing.
ETC will be treated as a corporation for U.S. federal income tax
purposes, and holders of ETC common shares will therefore receive
an IRS Form 1099, rather than a Schedule K-1, for federal income
tax reporting. As part of this transaction, in exchange for the
contribution by ETC to ETE of all of the assets and liabilities of
WMB, ETE will issue to ETC a number of ETE Class E common units
equal to the number of ETC common shares to be issued in the
transaction. The Class E common units will be entitled to receive
the same quarterly cash distribution per unit as the quarterly cash
distribution per ETE common unit. As ETE has agreed to provide all
administrative services to ETC and to indemnify ETC for all
liabilities incurred by ETC, ETC is expected to distribute 100% of
the after-tax cash distributions it receives from ETE to holders of
ETC common shares on a quarterly basis as a cash dividend. ETC will
benefit from a dividend equalization agreement through calendar
2018 with ETE that ensures that ETC shareholders will receive the
identical cash dividend as an ETE unit holder.
To address any uncertainty as to how the newly listed ETC common
shares, as a new security, will trade relative to ETE common units,
ETE has agreed that, as part of the merger consideration, each ETC
share will have attached to it one contingent consideration right
(“CCR”). In the event the ETC common shares trade at a discount to
the ETE common units on a daily volume-weighted average basis over
the 23-month period following the 20th trading day after the
closing of the transaction, ETC will make a one-time payment in an
amount equal to such volume-weighted price differential (the
“Shortfall Amount”). Any Shortfall Amount will be settled in ETC
common shares (at the then current value) or cash at ETE’s
election, and ETE will issue a proportionate amount of Class E
common units to ETC. If ETC common shares trade at a premium to ETE
common units over the same 23-month period, the CCR will expire
with no value and a portion of the ETE Class E common units held by
ETC will be cancelled based on the volume weighted average price
differential, thereby reducing ETC’s ownership interest in ETE.
There is also an automatic termination provision of the CCR if ETC
trades above ETE on a daily VWAP basis for 20 consecutive trading
days and there is no Shortfall Amount outstanding at the end of
that 20 trading day period.
The transaction is expected to be tax-free to Williams’
stockholders, except with respect to any cash received. The parties
believe that all stakeholders will benefit from the cash flow
diversification associated with ownership in three large investment
grade MLPs (Energy Transfer Partners, L.P. (“ETP”), Sunoco
Logistics Partners L.P. (“SXL”) and WPZ). As a result, the
combination creates a truly unique and diversified collection of
compatible businesses that will drive greater near- and long-term
value.
Kelcy Warren, ETE’s Chairman, said, “I am excited that we have
now agreed to the terms of this merger with Williams. I believe
that the combination of Williams and ETE will create substantial
value for both companies’ stakeholders that would not be realized
otherwise.”
Frank T. MacInnis, Chairman of the Williams Board of Directors,
said, “After a comprehensive evaluation of strategic alternatives,
including extensive discussions with numerous parties, the Williams
Board of Directors concluded that a merger with Energy Transfer
Equity is in the best interests of Williams’ stockholders and all
of our other stakeholders. The merger provides Williams
stockholders with compelling value today as well as the opportunity
to benefit from enhanced growth projects.”
Alan Armstrong, President and Chief Executive Officer of
Williams, said, “Williams’ intense focus on connecting the best
natural gas supplies to the best natural gas markets will be a
significant complement to the ETE family of diverse energy
infrastructure. As a combined company, we will have enhanced
prospects for growth, be better able to connect our customers to
more diverse markets, and have more stability in an environment of
low commodity prices. Importantly, Williams Partners will retain
its current name and remain a publicly traded partnership
headquartered in Tulsa, Oklahoma.”
During the course of its diligence process over the last ten
weeks, the Energy Transfer family has identified significant
commercial synergies. These synergies run across a broad spectrum,
ranging from new revenue opportunities, improved operational
efficiencies and performance, new capital opportunities and
prioritization of existing capital projects. ETE expects that the
anticipated EBITDA from these commercial synergies will exceed $2
billion per year by 2020 (or more than 20% of the estimated current
pro forma EBITDA for the combined company) and will require overall
incremental capital investment of more than $5 billion to
achieve.
As part of the merger, WPZ will retain its current name and
remain a publicly traded partnership headquartered with a
meaningful ongoing presence in Tulsa, Oklahoma. Also as a result of
this announcement, WMB and WPZ are withdrawing their financial
guidance. ETE expects no impact from this transaction on the credit
ratings of ETP, SXL, Sunoco L.P. (“SUN”) or WPZ.
ETE and Williams believe there are numerous meaningful benefits
from a proposed combination:
ETE Stakeholders
- At closing, the transaction will be
immediately accretive to distributable cash flow and distributions
per unit for ETE and is expected to be credit positive to ETE’s
credit ratings;
- ETE’s distribution growth rate is
expected to remain at its current level;
- as a result of diligence, the size of
both the expected cost savings and the anticipated commercial
synergies exceeds ETE’s previous expectations and will help ensure
that the duration of ETE’s distribution growth rate will be longer
as a result of the transaction;
- the introduction of cash into the
transaction consideration has reduced the ETC share issuance by
over 260 million shares (or approximately 18.5% of the overall ETC
share issuance);
- the number of possible opportunities to
migrate assets within the Energy Transfer family and find
additional commercial opportunities, not currently quantified,
within the expanded asset base will increase significantly, thereby
creating more value for ETP, SXL, WPZ and SUN, which in turn will
result in increased cash flow growth for ETE;
- the ability of ETE to broaden its
overall shareholder base through the ETC structure; and
- the creation of ETC will result in
increased liquidity for ETE unitholders because of the option for
ETE unitholders to exchange ETE common units for ETC common
shares.
WMB Stakeholders
- A compelling transaction that provides
Williams’ stockholders with:
- an attractive premium to the implied
trading price of WMB assuming WMB traded in line with either the
Alerian index or its midstream peers since the date of ETE’s
initial offer;
- a pro forma level of dividend per ETC
common shares received that will exceed the 2016 dividend per WMB
share that Williams had forecast on a pro forma basis for the
Williams/WPZ merger;
- ETC dividend growth superior to that of
Williams on a pro forma basis for the proposed Williams/WPZ
merger;
- the option to elect cash in the
transaction will allow Williams’ stockholders to monetize, on a
taxable basis, all or some of their investment in WMB, subject only
to the aggregate $6.05 billion pool of cash consideration being
fully utilized;
- the exchange of WMB shares for ETC
common shares is expected to be tax free to WMB stockholders,
except with respect to cash received;
- for each outstanding ETC common share,
ETC will receive from ETE the same cash distribution per quarter as
ETE distributes with respect to each ETE common unit;
- ETC will benefit from a dividend
equalization agreement through calendar 2018 that ensures that ETC
shareholders will receive the identical cash dividend as an ETE
unitholder;
- the CCR is intended to address any
trading price differences between ETC and ETE during the two-year
period following closing;
- ETE will become co-obligor of Williams’
existing debt and Williams’ credit facility will be terminated at
closing; and
- ETC common shares are expected to have
tremendous liquidity, a strong growth profile and the potential for
inclusion in the S&P 500 index (similar to WMB’s current
inclusion in that index).
WPZ Stakeholders
- There is no expected impact to WPZ’s
credit ratings as a result of the ETE/Williams combination;
- WPZ unitholders will have greater
distributable cash flow from material cost savings and synergies of
up to $400 million per annum with WPZ joining the Energy Transfer
shared service model;
- the combination will create new
commercial opportunities for WPZ, including the potential to
acquire assets from the overall Energy Transfer group, that will
improve WPZ’s business outlook, cash flow growth and overall
financial profile;
- WPZ unitholders will benefit from
having a general partner, ETE, that, based on the unique intrinsic
financial and strategic optionality in the Energy Transfer family,
will be in a position to help WPZ fully realize its long-term
growth potential; and
- WPZ will receive a $428 million
break-up fee for the termination of its merger agreement with WMB
payable to all outstanding limited partnership units of WPZ
including WMB’s approximate 60 percent ownership.
Regulatory Process and Transaction Timing
The closing of the transaction is subject to customary
conditions, including the receipt of approval of the merger from
Williams’ stockholders and all required regulatory approvals,
including approval pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (“HSR”). ETE and Williams anticipate that
the transaction will be completed in the first half of 2016. There
is no requirement for an ETE unitholder vote, providing additional
deal certainty to Williams’ stockholders. The parties intend to
commence the integration planning process immediately following
receipt of HSR clearance to ensure that the implementation of the
shared service model between Energy Transfer and WMB/WPZ is fully
effective and functioning at completion of the merger.
Investor Conference Call
Energy Transfer will hold a conference call to discuss the
transaction today at 8 a.m. Central Time (9 a.m. Eastern Time).
The dial-in number for the call is 1-866-700-5192 in the United
States, or +1-617-213-8833 outside the United States, passcode
64571414. A live webcast of the call may be accessed on the
Investor Relations page of Energy Transfer's website at
www.energytransfer.com. The call will be available for replay for
seven days by dialing 1-888-286-8010 (from outside the U.S.,
+1-617-801-6888) passcode 55056274. A replay of the broadcast will
also be available on Energy Transfer’s website for 30 days.
Energy Transfer Equity, L.P. (NYSE:ETE) is a master
limited partnership which owns the general partner and 100% of the
incentive distribution rights (IDRs) of Energy Transfer Partners,
L.P. (NYSE:ETP) and Sunoco, LP (NYSE:SUN), approximately 2.6
million ETP common units, approximately 81.0 million ETP Class H
Units, which track 90% of the underlying economics of the general
partner interest and IDRs of Sunoco Logistics Partners L.P.
(NYSE:SXL), and 100 ETP Class I Units. On a consolidated basis,
ETE’s family of companies owns and operates approximately 71,000
miles of natural gas, natural gas liquids, refined products, and
crude oil pipelines.
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), including all of the
2 percent general-partner interest. Williams Partners 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, Williams Partners 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. Williams
Partners’ 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 most recent Annual Report on
Form 10-K and Quarterly Report on Form 10-Q for each of ETE, ETP,
SXL, SUN, WMB and WPZ filed with the U.S. Securities and
Exchange Commission (the "SEC") and assumptions, risks and
uncertainties relating to the proposed transaction, as detailed
from time to time in ETE’s, ETP’s, SXL’s, SUN’s, WMB’s 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 other reports or documents that
ETE, ETP, SXL, SUN, WMB 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 and 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 obtain
required regulatory approvals and meet other closing conditions to
the transaction, including approval under HSR and 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 WMB undertakes no 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
the entry by ETE and Williams into definitive agreements for a
combination of the two companies. In furtherance of this proposal
and subject to future developments, ETE, ETC and Williams may
file one or more registration statements, proxy statements or other
documents with the SEC. 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 transaction.
INVESTORS AND SECURITY HOLDERS OF ETE AND WILLIAMS ARE URGED TO
READ THE PROXY STATEMENT(S), REGISTRATION STATEMENT, PROSPECTUS AND
OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY IF
AND WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED BUSINESS COMBINATION TRANSACTION.
Any definitive proxy statement(s) (if and when available) will be
mailed to stockholders of Williams. Investors and security
holders will be able to obtain free copies of these documents (if
and when available) and other documents filed with
the SEC by ETE, ETC and Williams through the web site
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 March 2, 2015 (as it may be amended from time to time).
Additional information regarding the interests of such potential
participants will be included in the proxy statement/prospectus and
other relevant documents filed with the SEC if and when they become
available. Investors should read the proxy statement/prospectus
carefully when it becomes available 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 25, 2015 (as it may be amended from time to time).
Additional information regarding the interests of such potential
participants will be included in the proxy statement/prospectus and
other relevant documents filed with the SEC if and when they become
available. Investors should read the proxy statement/prospectus
carefully when it becomes available before making any voting or
investment decisions. You may obtain free copies of these documents
from Williams using the sources indicated above.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150928005640/en/
Energy Transfer Equity,
L.P.Investor Relations:Brent Ratliff, 214-981-0795orLyndsay
Hannah, 214-840-5477orMedia Relations:Granado Communications
GroupVicki Granado,
214-599-8785mobile: 214-498-9272orBrunswick GroupSteve Lipin,
212-333-3810orMark Palmer, 214-254-3790orThe
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
Williams Partners (NYSE:WPZ)
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