Williams Cos. Fights for Energy Transfer Merger

Investors backed Williams' board, which is appealing a judge's ruling that Energy Transfer can walk away from the deal.
Matthew HellerJune 28, 2016

Shareholders of Williams Cos. have approved its takeover by Energy Transfer Equity (ETE) despite a judge’s ruling last week that the rival pipeline operator can walk away from the deal.

At a special meeting on Monday, investors followed the recommendation of Williams’ board, voting 63% of its outstanding shares in favor of the merger, which appeared to have been derailed by its court battle with Energy Transfer.

Williams also announced it had filed papers to appeal the June 24 decision of Delaware Court of Chancery Vice Chancellor Sam Glasscock, who found Energy Transfer was entitled to pull out of the merger because of potential tax liability.

“Williams does not believe ETE has a right to terminate the merger agreement because ETE has breached the merger agreement by failing to cooperate and use necessary efforts to satisfy the conditions to closing,” Williams said in a statement.

As The Wall Street Journal reports, Kelcy Warren, Energy Transfer’s billionaire chief executive, spent months pursuing Williams, ultimately striking a deal in September that was worth $33 billion at the time. But he began to have second thoughts as oil prices continued to slide.

After Energy Transfer said its lawyers had found a potential tax pitfall and wouldn’t be able to deliver tax opinion required for the deal to close, Williams sued to force Energy Transfer to go through with the merger.

In his decision, Vice Chancellor Glasscock said Energy Transfer’s lawyers acted in good faith in withholding the tax opinion. The lawyers had warned that the decline in Energy Transfer’s stock price could lead the IRS to bill the merged companies for an amount estimated at more than $1 billion.

Even if the deal is ultimately canceled, some analysts believe that wouldn’t necessarily be a bad outcome for Williams, which could entertain offers from another buyer or focus on its own operations. “Both of these enterprises are better off alone than they would have been if saddled with even more collective debt,” Robert W. Baird analyst Ethan Bellamy told the WSJ.