$37.7bn mega-merger announced between Energy Transfer and Williams

Energy Transfer Equity L.P. (NYSE: ETE) and The Williams Companies Inc. (NYSE: WMB) on Sept. 28 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, the companies said.

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. 

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.

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.”

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.

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. 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.

Energy Transfer Equity, L.P. 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 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% of Williams Partners L.P. (NYSE: WPZ), including all of the 2% 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. 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 power generation, heating and industrial use. Williams Partners’ operations touch approximately 30% of U.S. natural gas.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.