Energy Transfer Equity Calls Off Williams Merger -- Update

By Alison Sider 

Energy Transfer Equity LP said Wednesday that it had terminated its merger agreement with rival pipeline operator Williams Cos., a deal valued at nearly $33 billion when it was signed last year.

The move was widely anticipated after a Delaware judge ruled on Friday that Energy Transfer could back out, since its lawyers couldn't deliver a necessary opinion on the deal's tax treatment.

But the fight may not be over. Williams has said it doesn't believe Energy Transfer has the right to terminate the deal, and filed notice that it will appeal the judge's ruling. Its shareholders voted in favor of the deal in a special meeting held Monday, despite indications from Energy Transfer that it planned to kill the agreement.

The deal the companies struck in September would have created a 100,000-mile network of pipelines. But buyer's remorse set in at Energy Transfer as oil prices continued their slide, and pain in the oil and gas sector spread to pipeline companies.

Kelcy Warren, Energy Transfer's chief executive, worried that the $6 billion cash component of the deal would trigger a credit ratings downgrade that would cascade throughout a network of partnerships he controls.

Energy Transfer said earlier this year that it had discovered a problem with the deal that could trigger unexpected taxes, and warned that its lawyers wouldn't be able to deliver a legal opinion that the merger would be tax-free. Williams sued in an effort to hold Energy Transfer to the terms of the merger agreement, arguing that its acquirer was just looking for an out.

The court sided with Energy Transfer, finding that the company's lawyers were acting in good faith when they discovered the tax issue. Obtaining the tax opinion from Energy Transfer's law firm was a condition for the deal to close.

Williams said in a statement Wednesday that it will seek monetary damages from Energy Transfer for its beaches. Williams has said the deal's collapse would cost it between $4 billion and $10 billion in lost value for its shareholders.

Write to Alison Sider at [e-mail]

(END) Dow Jones Newswires

June 29, 2016 10:19 ET (14:19 GMT)

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