One Line Shows Energy Transfer, Williams Not Holding Hands

  • Energy Transfer reiterates concerns over tax opinion needed
  • Williams gains, Energy Transfer falls after dual filings

On Tuesday, Energy Transfer Equity LP and its takeover target Williams Cos. both made almost identical filings that, at first glance, had the market thinking a deal between the two was getting closer to the finish line.

Then analysts including Brandon Blossman of Tudor Pickering Holt & Co. spotted a paragraph in Energy Transfer’s filing that’s missing in Williams’ document. The extra line reminds investors that Energy Transfer hadn’t received an important tax clearance needed to finalize the multibillion-dollar deal.

While they both said in their respective statements that they were changing the terms of the merger to speed up administrative steps, buying them time to hammer out disagreements before a June 28 closing deadline, Energy Transfer inserted a line reiterating its April announcement that tax adviser Latham & Watkins LLP hasn’t given an opinion needed to close the deal. The so-called “721 opinion” would deem the transaction an exchange that frees shareholders from tax liabilities.

‘Gut Reaction’

“Had that not been included, I’d have had a gut reaction that this deal will make it over the finish line because they’re holding hands and working together,” Blossman said in a phone interview. Energy Transfer’s inclusion of the paragraph, Blossman added, may be an effort to “mitigate anyone from walking away with that opinion.”

Similarly, Timm Schneider, an analyst for Evercore ISI, said in a note to clients that he’d be weighing in later on the filings: “Quick sneak peak," he wrote. “Both WMB & ETE filed identical language except one paragraph that ETE included in their filing that WMB omitted.”

Lance Latham, a spokesman for Williams, declined to comment. A spokeswoman for Energy Transfer did not immediately respond to phone and e-mail requests seeking comment.

The companies have lost nearly half their market value since Energy Transfer offered $43.50 apiece for Williams shares last September, dragged down by the collapse in oil prices. That’s cast doubt on whether the takeover will actually close.

The Securities and Exchange Commission also sent a letter to Energy Transfer and Williams on April 25 requesting more information to be included in the proxy statement and prospectus concerning the deal, the filings showed.

Energy Transfer fell 0.7 percent to $12.03 after earlier sliding as much as 6.1 percent. Williams climbed 3.1 percent to $19.39.

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