Photographer: Akos Stiller/Bloomberg

Williams Says Energy Transfer Trying to Dodge 2015 Merger Terms

  • Pipeline operators struck $37.7 billion deal in September
  • Energy Transfer hasn’t received favorable tax ruling so far

Williams Cos. said Energy Transfer Equity LP is breaching a merger agreement “through a pattern of delay and obstruction” and asked a court in Delaware to prevent the pipeline operator from terminating the deal.

Energy Transfer -- which offered $43.50 a share, or $37.7 billion, for rival Williams in September -- said May 5 that the multibillion-dollar takeover is in danger of falling apart because it hasn’t secured a necessary legal opinion confirming that the acquisition would be tax-free to shareholders. Williams told the Delaware Chancery Court that Energy Transfer should be prohibited from using its failure to get the ruling as justification for backing out of the deal, according to a statement released Friday.

“ETE has breached the merger agreement through a pattern of delay and obstruction designed to allow ETE to avoid its contractual commitments,” Williams said in the statement, adding that it hasn’t changed its support for the accord.

The filing couldn’t immediately be confirmed at the court, and spokesmen and attorneys for Tulsa, Oklahoma-based Williams couldn’t be reached for comment after normal business hours.

Falling Oil Prices

The dispute marks the latest obstacle in a proposed merger that has seen its value crater. Williams shares have plunged 47 percent since the deal was announced on Sept. 28, while Dallas-based Energy Transfer is down 38 percent. The drop in oil prices, which has weighed on both companies’ shares, casts doubt on whether Energy Transfer will actually follow through with the purchase.

Energy Transfer’s comments about the tax ruling “solidified for a lot of people that it’s unlikely the deal happens on current terms -- or at all,” Jefferies LLC analyst Chris Sighinolfi said on May 6.

The deadline to complete the agreement is June 28, when either party can walk away from the deal if it isn’t complete. Energy Transfer isn’t allowed to cancel it before then, according to the agreement’s terms. Williams also told the court that the company shouldn’t be allowed to use any failure to complete the deal by that date as an excuse to terminate.

The pipeline giants have been fighting each other in court for different alleged breaches to the terms of their agreement. Williams also accused Energy Transfer Chief Executive Officer Kelcy Warren of “maliciously orchestrating” a unit offering that would guarantee him more than $200 million a year in payments at the expense of other investors.

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