Enterprise and Williams Clash After Takeover Talks Collapse

  • Enterprise says Williams showed a “lack of engagement”
  • Williams says Enterprise didn’t give board chance to review

Williams Cos. just lost another suitor.

Two months after Energy Transfer Equity LP walked away from a $33 billion deal to take over its pipeline rival, another possible buyer, Enterprise Products Partners LP, said it’s no longer interested in Williams either. On Thursday, Enterprise said it dropped its pursuit after Williams showed a “lack of engagement.” Williams responded by saying the companies had held a series of discussions and that its board was reviewing Enterprise’s latest proposal when the company pulled out.

The clash is only the latest for Williams, which is facing a proxy fight with one of its largest investors over the failed Energy Transfer takeover. The company appointed three new directors on Aug. 29, seeking to head off shareholder support for a new slate of members proposed by activist investor Keith Meister at Corvex Management LP. He was one of six directors who resigned in July after failing to oust Chief Executive Officer Alan Armstrong following the Energy Transfer deal unraveling.

Surprised, Disappointed

Williams said it was “surprised” by Enterprise’s announcement and that its board remains “open to considering any potential strategic alternative.” Enterprise Chief Executive Officer Jim Teague said in his own statement that the company was “disappointed” and would continue to pursue opportunities for growth.

Enterprise’s last offer for Williams was at a premium of less than 10 percent, CNBC’s David Faber said on Friday, citing people familiar with the matter. Enterprise is a better partner for Williams than Energy Transfer and the three new Williams directors should engage with shareholders, Faber said Meister told him.

The announcement was made after the close of regular trading in U.S. markets. Williams fell 2.3 percent to $30.42 as of 9:40 a.m. in New York on Friday. Enterprise was down 0.5 percent at $27.11.

“It’s business as usual for Williams," said Mark Hanson, an analyst with Morningstar Inc. “I do think that consolidation will continue to be a trend for midstream companies.”

Enterprise’s announcement came just two days after Enbridge Inc. said it would buy pipeline operator Spectra Energy Corp. in a $28 billion all-stock deal, increasing the pressure on other pipeline giants including Enterprise and Kinder Morgan Inc. to pursue similar acquisitions. Deals in the pipeline space have picked up in the past two years as companies hunt for bargains following a collapse in oil prices.

Enbridge’s takeover of Houston-based Spectra may mark the beginning of a “supermajor” era for the pipeline industry, according to Rebecca Followill, head of research at U.S. Capital Advisors. She said the pact may “light a fire in the bellies” of larger pipeline players, setting off a wave of consolidation that could accelerate through the end of 2016.

Earlier this year, TransCanada Corp. agreed to buy Columbia Pipeline Group Inc. for $10.2 billion.

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