Energy Merger Hits Sour Note -- WSJ

By Anne Steele 

Williams Cos. on Friday said the potential financial benefit expected from its pending merger with Energy Transfer Equity LP would be 94% lower than the companies initially projected, the latest hurdle to the troubled deal.

The energy companies now estimate merger-related synergies of $126 million annually by 2020, down dramatically from the $2 billion annually initially projected by Energy Transfer when the deal was struck in September. At the time, the deal was valued at around $33 billion.

Williams said the new estimate stemmed from integration planning by both companies in early 2016. Even if market conditions return to July 2015 levels, merger-related synergies would only be $543 million, Williams said.

The Tulsa, Okla.-based company said it would file an amended disclosure to its merger-agreement proxy statement in connection with settling litigation -- unrelated to the deal -- by a stockholder.

Also Friday, Williams said its board declared a special dividend of 10 cents a share to stockholders upon closing of the deal. But the merger, which shareholders are scheduled to vote on June 27, remains on shaky ground.

Energy Transfer has been aiming to restructure or escape the planned acquisition as low commodities prices spread pain through the energy sector. The two pipeline companies are also in a legal tussle as Williams seeks to undo a convertible-share issue by Energy Transfer to help fund the deal and force Energy Transfer to proceed with the agreement.

Earlier this week, Williams said proxy advisory firm Institutional Shareholder Services is recommending shareholders vote in favor of the acquisition despite pressures from low commodities prices.

ISS noted the deal's significant cash component, the combined company's more diversified customer base, and shareholders' opportunity to have a nearly 50% equity stake in a merged company that is seen as having stronger cash flow than Williams would have on its own.

In a letter Wednesday urging its shareholders to support the deal, Williams said the merger would lead to "significant synergies" while reiterating its dividend could be cut if the deal isn't completed. In a stand-alone scenario, the company said, its efforts to improve its balance sheet also would likely include further capital-spending cuts, asset sales and equity issuance.

Shares of Williams rose 1.8% to $22.53 in 4 p.m. ET trading Friday in New York, while Energy Transfer shares edged up 0.2% to $12.99.

Write to Anne Steele at [e-mail]

(END) Dow Jones Newswires

June 18, 2016 02:48 ET (06:48 GMT)

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