Williams Slides to 6-Year Low on Speculation of Deal Trouble

  • Credit downgrades, oil price slide add to stock woes
  • Concern Energy Transfer may have to cut payout: investor

Williams Cos., the pipeline company that agreed to be bought by Energy Transfer Equity LP in September, fell to a six-year low as credit downgrades and slumping energy prices exacerbated concerns over the $38 billion deal.

A 60 percent slump in the value of both stocks since Energy Transfer offered $43.50 apiece for Williams in cash, stock, or a combination of both, has fueled uncertainty over the deal, Skip Aylesworth, who owns 3 million Williams shares among the $1.5 billion he manages for Hennessy Funds, said. There’s concern Energy Transfer may have to cut payouts to fund expansions planned by Williams, he said.

“If I was Williams, I’d look at every chance to say, ‘no, thank you,’ and go my separate way,” said Aylesworth, who spoke by phone Tuesday from Boston.

Williams tumbled 18 percent to $13.61 in New York, the lowest since September 2009. The stock has lost 47 percent this year. Energy Transfer fell 9.9 percent to $8.09.

First Half

Williams agreed to be bought by Energy Transfer Equity after a nine-month takeover battle. The deal is expected to close in the first half, the companies said at the time. The sale will also give Energy Transfer control of Williams Partners LP, which retreated 16 percent to $16.22, for a seventh consecutive decline.

There are no discussions taking place at the moment between Energy Transfer and Williams about restructuring the deal, CNBC’s David Faber reported Tuesday. 

Williams has no new information on the status of the deal, Tom Droege, a company spokesman, said Wednesday by e-mail. Vicki Anderson Granado, a spokeswoman for Energy Transfer, didn’t immediately respond to a phone message and e-mail seeking comment. 

A 30 percent slump in oil prices in the past year has depressed the value of pipeline stocks, forcing peers led by Kinder Morgan Inc. to cut payouts to conserve cash rather than sell stock to raise it. Investors worry how Energy Transfer will fund expansions at Williams Partners, the master-limited partnership controlled by Williams that handles about a third of U.S. gas flows, said Michael Kay, a Bloomberg Intelligence analyst. 

Williams’ issuer default rating and senior unsecured ratings were cut to BB+ from BBB-, Fitch Ratings Ltd. said in a statement Monday. The stock remains on rating watch negative. Williams Partners was also lowered by one level.

Brent oil dropped below $30 a barrel on Wednesday for the first time since April 2004 as a global supply surplus showed no sign of abating.

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