Williams to Buy Williams Partners for $13.8 Billion in Stock

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Williams Cos. agreed to buy the 40 percent of Williams Partners LP it doesn’t already own for $13.8 billion, simplifying its corporate structure in a bid to reduce taxes, increase payouts and accumulate cash for expansion.

Holders of Williams Partners, the pipeline company that handles about 30 percent of U.S. natural gas supply, will receive 1.115 Williams shares for each unit, the company said in a statement Wednesday. The all-stock offer, Tulsa, Oklahoma-based Williams’ biggest acquisition, represents an 18 percent premium based on Tuesday’s closing prices and is expected to close in the third quarter.

Williams follows Kinder Morgan Inc., the largest pipeline operator, in consolidating a master-limited partnership to make more cash available to pay investors and expand operations. Kinder Morgan bought three partnerships it controls for $32 billion in November. Master-limited partnerships pass through much of their earnings to investors without paying federal income tax.

“The lower cost of capital and improved tax benefits expected from this transaction increase our confidence in extending the duration of our expected 10 percent to 15 percent dividend growth rate through 2020,” Williams Chief Executive Officer Alan Armstrong said in the statement.

Williams Partners owns or operates more than 33,000 miles (53,000 kilometers) of natural gas and natural gas liquids pipelines. Williams first sold units in the partnership to the public in 2005.

The announcement was made before the start of regular trading on U.S. markets. Williams climbed 4.8 percent to $52.50 at 7:42 a.m. in New York. Williams Partners gained 19 percent to $56.51.

Barclays Plc advised Williams on the transaction. Evercore Partners Inc. advised Williams Partners.

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