Williams Companies (WMB) Stock Up Sharply After Rejecting Unsolicited Bid

Shares of the The Williams Companies Inc. (WMB) were up +13.91 or +28.78 percent to $62.25 per share in Monday's premarket after receiving an unsolicited bid from Kelcy Warren's Energy Transfer Equity (ETE) Limited Partnership. According to a statement, the bid was received on Sunday but Williams refused to identify the bidder at the time. Williams Companies stock closed at $48.34 per share, down -0.63 or -1.29 percent in Friday's regular trading session.

Founded in 1908 by Miller and David Williams in Fort Smith, Arkansas, Tulsa, Oklahoma based The Williams Companies, Inc. The company is a premier provider of natural gas infrastructure in North America and owns a majority interest in Williams Partners (WPZ) including a two percent general partner interest.
Williams Partners owns and operates over 33,000 miles of pipeline systems in the United States and Canada, which includes the largest and fastest growing pipeline in North America. In May, Williams and Williams Partners L.P signed a definitive agreement for Williams to acquire all of WPZ's common shares in an all stock for unit transaction at a 1.115 ratio of Williams Co. common shares for each unit of WPZ. The transaction is valued at approximately $14 billion.

Energy Transfer Equity, L.P. operates through its wholly owned subsidiaries, Energy Transfer Partners G.P, L.P and Energy Transfer Partners, L.L.C. The company operates the Oasis Pipeline, a fuel distribution system with approximately 2,100 miles of intrastate natural gas pipeline. Also, a 583 mile natural gas pipeline, the East Texas Pipeline, and the Houston Pipeline System, comprised of about 4,200 miles of intrastate natural gas pipeline.

ETE had originally made an offer for Williams Companies in a letter to the company's Chief Executive on May 19th, 2015, followed by another letter dated June 11th, 2015, which was sent to the Williams board with the offer most recently confirmed in a letter dated June 18th, 2015. The all equity transaction is valued at approximately $53.1 billion with the inclusion of the assumption of debt.

Under the proposal, ETE would acquire all of William's common stock at an implied price of $64 per share, a +32 percent premium over the stock's closing price on Friday. The merger would be in the form of common shares in a C-corp entity (ETE Corp.) which would have the same economic attributes as ETE common stock.

The amount of shares in the new ETE Corp. would be issued to Williams' stockholders on a fixed exchange ratio of 0.9358 shares of ETE Corp. for each Williams share. ETE Corp. would be publicly traded under the ticker, ETC with the transaction tax free to Williams' shareholders. ETE stock closed at $68.39 last Friday.

In a statement yesterday, Alan Armstrong, Williams Co. President and Chief Executive Officer stated that, "Our Board and management team remain committed to acting in the best interests of shareholders, and in light of the unsolicited proposal, our Board believes it is in the best interest of shareholders to conduct a thorough evaluation of strategic alternatives .

"Williams' premier infrastructure connects the best natural gas supplies to the best markets, and our strategy has provided substantial shareholder value allowing us to deliver a compound annual dividend growth rate of approximately 30% since we embarked on our strategy in 2012. In addition, we expect the growth of our business and the benefits from the WPZ transaction to enable 10-15% dividend growth through 2020. We are confident in our strategic plan and the significant value that will be created through the acquisition of WPZ and our large portfolio of growth projects. At the same time, we are open minded and committed to ensuring that Williams is maximizing value for shareholders.

Both stocks are trading higher in this morning's premarket, with ETE stock up a fraction indicating that investors are not disappointed with the offer.

Other News About WMB

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Williams To Explore Strategic Alternatives

After rejecting ETE's $64 per share bid, the company said it will explore strategic alternatives.

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Published on Jun 22, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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