Williams Cos. Moves to Save Merger With Energy Transfer Equity
May 15 2016 - 9:50PM
Dow Jones News
Williams Cos. has filed a new lawsuit against pipeline giant
Energy Transfer Equity, seeking to force the company to proceed
with their merger agreement.
Williams has accused its would-be buyer of trying to wriggle out
of the deal. In a filing in the Delaware Court of Chancery
announced late Friday, the company asked a judge to bar Energy
Transfer from terminating the merger agreement over a tax issue
that Energy Transfer has argued is critical, or if the deal isn't
closed by the June 28 deadline.
"Williams alleges that ETE has breached the merger agreement
through a pattern of delay and obstruction designed to allow ETE to
avoid its contractual commitments," the company said in a statement
late Friday.
Energy Transfer said in a statement Sunday evening that
Williams's suit was delaying progress on the merger.
"ETE is disappointed that Williams, rather than seriously
engaging in discussions regarding the existing transaction, has
chosen to file a third separate lawsuit in the last six weeks
regarding our pending merger," the company said.
Energy Transfer has suffered from a severe case of buyer's
remorse since it agreed to buy Williams, a rival pipeline company,
in a deal valued at $33 billion when it was announced last
September.
The merger contract was written with unusually tight provisions
on how Energy Transfer could get out of the agreement. Williams
would owe Energy Transfer a $1.48 billion breakup fee if Williams
walked away. Williams shareholders could still vote down the
merger, but Williams's board is pushing to hold Energy Transfer to
the terms of the deal.
Energy Transfer said in its statement Sunday that circumstances
have changed since the companies struck their deal, and suggested
that Williams's board should revisit its recommendation that
shareholders vote in favor of the merger. Energy Transfer said it
has made "multiple attempts to engage with Williams" about a path
forward but has been rebuffed.
Williams declined to comment Sunday evening.
In recent weeks, Energy Transfer has argued that it can't
complete the acquisition—at least not as it is currently
structured—because its lawyers can't guarantee that the deal will
be a tax-free transaction for Williams shareholders. Obtaining a
favorable opinion on the tax issue from Energy Transfer's lawyers
is a requirement for the deal to close.
"We intend to honor all of our commitments under the merger
agreement, but we can't close this deal," Energy Transfer Chairman
Kelcy Warren said during a conference call earlier this month.
"Absent a substantial restructuring of this transaction, which
Energy Transfer has been very willing and actually desiring to do,
absent that, we don't have a deal."
Williams has said it disagrees with the lawyers' assessment of
the tax risks.
Relations between the two companies have soured in recent
months. Oil prices continued to fall after the merger agreement was
announced, and investors began to worry that the $6 billion cash
portion of the deal would saddle Energy Transfer with too much debt
during a protracted downturn in oil-and-gas markets.
Williams's new suit is the latest legal maneuver in the
continuing saga. Last month, Williams sued in Delaware over the
issuance of preferred convertible shares to certain Energy Transfer
insiders, including Mr. Warren. With those special shares, company
insiders agreed to give up a portion of their cash distribution in
exchange for more equity in the company down the road.
Williams also sued Mr. Warren in Texas, arguing that he
interfered with the deal by going forward with the share
issuance.
Williams argued the convertible-share plan would protect Energy
Transfer insiders from any future cuts to cash payouts at the
expense of Williams shareholders. Energy Transfer has said the
special shares will help it pay down debt and countersued Williams,
arguing it had breached the merger agreement by blocking Energy
Transfer from offering the special shares more broadly.
Write to Alison Sider at alison.sider@wsj.com
(END) Dow Jones Newswires
May 15, 2016 21:35 ET (01:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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