Williams Being Acquired?

[SXSW]

The merger received SEC approval.  Will the shareholders vote it down?

http://www.tulsaworld.com/business/energy/williams-gets-sec-approval-needed-to-mail-ballots-for-merger/article_eb4f2e80-a16d-57f9-8611-11c541fe1ff4.html

[Conan71]

They may not have to.  ETE is trying to worm their way out:

ETE seeks court ruling to allow termination of Williams merger

Related story: Williams gets SEC approval needed to mail ballots for merger vote

Related story: Date announced for Williams shareholder vote on ETE merger

Energy Transfer Equity announced Thursday that it is seeking a court decision that Williams has breached the merger agreement the companies made on Sept. 28 and that for that reason ETE is entitled to terminate the agreement.

The request for the declaratory judgement is part of an affirmative defense and counterclaim that ETE has filed in response to the lawsuit brought by The Williams Cos. Inc. in the Delaware Court of Chancery on May 13. The counterclaim documents were filed under seal on May 20.

According to the press release issued Thursday, the counterclaim alleges that Williams has breached the merger agreement entered into with ETE on September 28, 2015, by, among other things:

the Williams board of directors modifying or qualifying its approval and recommendation of the merger by, among other things, (i) modifying, qualifying or disclaiming the fundamental bases for its original recommendation of the merger, including by concluding that the fairness opinions obtained by the Williams board of directors are no longer reliable and declining to obtain new fairness opinions, (ii) refusing to reconfirm its recommendation of the merger that was made on September 28, 2015 in the face of such disclaimers, and (iii) consistently making public statements implying that the Williams Board supports enforcing the merger agreement as opposed to completing the merger;
refusing to cooperate with ETE’s efforts to finance the merger;
failing to use reasonable best efforts to complete the merger; and
suing Kelcy Warren, the chairman of the board of directors of ETE’s general partner, personally in Dallas County, Texas, in violation of a mandatory forum selection provision in the merger agreement.
ETE also announced Thursday that earlier this week the District Court of Dallas County, Texas, granted its motion to dismiss the lawsuit brought by Williams against Kelcy Warren in April.

ETE announced that while the litigation is pending, the company intends to continue to comply with all of its obligations under the merger agreement.

The parties have agreed to expedited proceedings with respect to the lawsuit in the Delaware Court of Chancery, with a trial scheduled to be held June 20 and June 21.

casey.smith@tulsaworld.com

[PonderInc]

Great letter from three former Williams CEO's laying out why shareholders should vote against the merger.  Anyone who's looking for a clear, thoughtful examination of what's wrong with this deal will appreciate the letter.

http://bloximages.newyork1.vip.townnews.com/tulsaworld.com/content/tncms/assets/v3/editorial/a/5b/a5b3e8c2-987a-5819-bb6a-588eb7304e06/5751b8858fa4a.pdf.pdf


Article in the TW:
http://www.tulsaworld.com/business/energy/former-williams-ceos-pen-letter-to-shareholders-in-opposition-to/article_46eb3031-9ba4-5c53-8358-8c6596e54197.html

[PonderInc]

I voted "no" on behalf of my 100 shares.  I'm certain that this will have exactly as much impact on the outcome as Dooey's campaign fluffer trip to NYC!

[cannon_fodder]

Neither probably matter much, at least according to a couple of sources. Apperently, without the required tax ruling - the deal is dead. Unfortunately, sources also indicate Williams leadership is pushing as hard as possible to make sure the deal goes through - even offering to renegotiate or even waive the billions of dollars in cash that ETE originally promised and make it an all stock deal. Obviously, Williams issuing a dividend warning the week of the stock vote isn't coincidence either.

Reuters thinks maybe it was a ploy, but maybe it also shows that Williams is seriously considering the possibility of not going out of business...
http://blogs.reuters.com/breakingviews/2016/06/09/williams-admits-stress-fracture-in-22-bln-deal/

The stock is trading at a 20% discount under the ETE offer.

What a debacle for William's management/board. First it turns down a merger offer, only to come back and accept a lower offer. Then it breaks its merger agreement with Williams Partners, and pays them $500 million for doing so.  Then they sign an agreement putting the target on the hook for $1.5 Billion of if the deal doesn't go through and allows ETE to get away with all kinds of shenanigans to scuttle the deal (slashed the benefit by 90%, unneeded layoff announcements, its attorneys refusing to issue a tax opinion, lawsuits). 

[PonderInc]

Williams simply can't be the party that "breaks" the agreement.  The $1.5 billion penalty would be destructive.  The whole process has already cost WMB massive $$: lower value of stock price, the aborted Williams Partners deal, a year's worth of lost productivity and the cost of hitting the "pause" button on almost all major projects.  Add to that the cost of replacing people who have already "jumped ship" to avoid uncertainty.  So, the goal has to be "don't blink first" and try to be in a position to force ETE to negotiate some sort of exit strategy where WMB could recoup the hundreds of millions of dollars this who fiasco has cost them.  And there's also the hope that court decisions could delay the shareholder vote until after the "walk away" date.  We'll see.  It should get interesting in the next two weeks.

[LeGenDz]

Judge rules in favor of ETE in Williams court battle; opinion will 'effectively end' merger, chamber leader says

A judge in the Delaware Court of Chancery has ruled in favor of Energy Transfer Equity in the Dallas company's court battle with would-be merger partner Williams Cos.
In a 62-page opinion, Delaware Judge Sam Glasscock denied Tulsa-based Williams Cos.' request for the court to prevent ETE from terminating the proposed merger due to the lack of a needed tax opinion.
"The Tulsa Regional Chamber and its Board of Directors are extremely pleased with the judge's ruling today," said Mike Neal, president and CEO of the chamber. "We anticipate this ruling will effectively end this merger attempt, but we would still encourage shareholders to vote 'no' on Monday."

Glasscock's decision follows a two-day trial earlier this week. The Delaware court agreed to an expedited trial after the companies filed litigation against each other in mid-May, just six weeks before the deadline for Williams shareholders to vote on the merger proposal.

Williams filed a lawsuit on May 13 accusing ETE of violating the merger agreement “through a pattern of delay and obstruction designed to allow ETE to avoid its contractual commitments.” ETE filed a counterclaim alleging that Williams is the party that has violated the merger agreement.

Integral to Williams' lawsuit and to Glasscock's decision was ETE's announcement that its tax attorneys Latham & Watkins LLP could not issue a tax opinion needed for the merger to go forward.
The needed "721 Opinion, named for the section of the Internal Revenue Code from which it comes, would have stated that the merger between Williams and ETE should be treated by authorities as a tax-free exchange. At present Latham has said it is unable to issue such an opinoin, a situation that under the terms of the merger agreement between the parties would allow ETE to terminate the deal the companies forged in September.
Williams claimed that ETE materially breached its contractual obligations by failing to use “commercially reasonable efforts” to secure the required 721 Opinion. Williams claimed that as a result ETE should be stopped from terminating the agreement.

Glasscock wrote in his opinion Friday that it is clear to him that leadership at Energy Transfer Equity had a change of heart about the merger after the deal was signed and that it would be in the best interest of ETE if the transaction didn't take place. However, Glasscock said, motive to avoid a deal can't be used to establish guilt.

"Just as motive alone cannot establish criminal guilt, however, motive to avoid a deal does not demonstrate lack of a contractual right to do so," Glasscock wrote. "If a man formerly desperate for cash and without prospects is suddenly flush, that may arouse our suspicions. Nonetheless, even a desperate man can be an honest winner of the lottery."
He concluded that Latham, as of the time of trial, could not in good faith issue an opinion that tax authorities should treat the merger as tax free and that Williams failed to demonstrate that ETE has materially breached its contractual obligation to undertake commercially reasonable efforts to receive such an opinion.

"I find that the Partnership is contractually entitled to terminate the Merger Agreement, assuming Latham’s opinion does not change before the end of the merger period, June 28," Glasscock wrote.
In a statement issued in response to the day's events, Williams Cos. said that it appreciated the court's consideration but that it does not believe ETE has the right to terminate the merger agreement.
"ETE has breached the Merger Agreement by failing to cooperate and use necessary efforts to satisfy the conditions to closing, including delivery of Latham & Watkins LLP’s Section 721(a) tax opinion," the company's statement reads.

"Williams remains committed to closing the merger under the Merger Agreement entered into with ETE on September 28, 2015. If ETE attempts to terminate the Merger Agreement, Williams will take appropriate actions to enforce its rights under the Merger Agreement and deliver its benefits to Williams’ stockholders."

The company said that the special meeting during which Williams stockholders will vote on whether or not to merge with ETE is still being held at 9:00 a.m. Monday at the company's headquarters in Tulsa.
The Williams Board said Friday that it continues to recommend that stockholders vote in favor of the merger agreement with ETE because "the cash and stock transaction with ETE will provide Williams stockholders a significant premium, meaningful participation in the upside of combined company and value certainty through the cash component."

ETE closed at $13.83 per unit Friday, down half a percent from the day’s open. Williams stock closed at $21.31 on Friday, down 2 percent.

http://www.tulsaworld.com/business/energy/judge-rules-in-favor-of-ete-in-williams-court-battle/article_889b06df-c670-5459-b27c-18e43f5e3484.html

[DowntownDan]

My favorite part was where Dewey spoke at a chamber press conference and patted himself and Mary Fallin on the back for their hard work fighting the merger.  As though they had anything to do with a legal technicality over a tax opinion.  They met with Williams board members in NYC and the board members are the ones still fighting like heck to try and get the deal to close.  Looks like they'll lose, but it's pretty clear they'll sell again when prices are back up and the opportunity arises.  Tulsa's only hope is that they go into a growth mode and look to be the acquirer going forward and not the acquiree. 

[cannon_fodder]

FWIW, the judges ruling appears to be heavily fact based. Basically, that the tax opinion is in doubt because of market forces - not because of shenanigans by ETE trying to weasel out of the deal (though he did say "a desperate man can win the lottery" in acknowledging them trying to get away).  That matters because factual determination are very hard to overturn on appeal.

[davideinstein]

My favorite part was where Dewey spoke at a chamber press conference and patted himself and Mary Fallin on the back for their hard work fighting the merger.  As though they had anything to do with a legal technicality over a tax opinion.  They met with Williams board members in NYC and the board members are the ones still fighting like heck to try and get the deal to close.  Looks like they'll lose, but it's pretty clear they'll sell again when prices are back up and the opportunity arises.  Tulsa's only hope is that they go into a growth mode and look to be the acquirer going forward and not the acquiree. 

Typical local politics.

[Hoss]

Typical local politics.

Should have seen the round-table/debate Fox23 just did for Bynum and Dooey.  Dooey looked like a train wreck.  Stuttering and stammering.  I expect he'll tell the campaign to double down on the negative ads tonight.  I was impressed with Bynum's composure.

[davideinstein]

Here's a question. Is Williams leaving potentially better for Tulsa in the long run?

[davideinstein]

Should have seen the round-table/debate Fox23 just did for Bynum and Dooey.  Dooey looked like a train wreck.  Stuttering and stammering.  I expect he'll tell the campaign to double down on the negative ads tonight.  I was impressed with Bynum's composure.

It's obvious Bynum is the better person, but he's still a part of the status quo.

[Conan71]

Here's a question. Is Williams leaving potentially better for Tulsa in the long run?

I don’t see how.  They have provided high paying jobs and have been an outstanding corporate citizen.  You can’t just replace a company like that,  especially when Tulsa’s idea of job growth these days is call centers and retail.

We are fortunate Williams resisted the exodus to Houston the other energy companies took.

I saw that the stock holders were overwhelmingly in favor of the merger in their vote today.  Must be the institutional investors.

[davideinstein]

Two part follow up...

1. What if the high paying workers stay and form their own ventures?

2. Between this and the early 2000's debacle, doesn't it somewhat hold our city hostage?