Energy Transfer Hits 5-Year Low Amid Williams Deal ConcernJim Polson
Energy Transfer Equity LP, the pipeline partnership that agreed to buy Williams Cos. for $38 billion, tumbled to a five-year low amid doubts about the deal.
Energy Transfer, based in Dallas, fell 14 percent to $7.54, the lowest close since June 2010. The stock is down 45 percent this year. Williams lost 2 percent to $15.78.
Energy Transfer has yet to explain how it will finance planned pipeline expansions after slumps by both stocks weakened their balance sheets, Michael Kay, an analyst at Bloomberg Intelligence, said by phone Tuesday. Williams said last week it’s committed to the deal.
“If the deal does complete, something would have to give,” Kay said. “They do have options. It doesn’t mean the deal needs to fall apart.”
Energy Transfer could sell down the majority stake in Williams Partners LP, a master-limited partnership it would acquire as part of the deal, or waive management fees that might otherwise approach $1 billion, Kay said.
Still, investors question whether Energy Transfer might better spend cash reducing debt and funding growth at pipeline partnerships it already controls, Kay said in research published Tuesday.
A more than 50 percent slump in the value of both stocks since Energy Transfer offered $43.50 apiece for Williams in September has fueled uncertainty about whether the transaction would be completed. The price is to be paid in cash, stock, or a combination of both.
“Might it fall apart, be restructured, or continue as currently contemplated?” Brian Kessens, a fund manager at Tortoise Capital Advisors LLC, said in an e-mailed statement Tuesday. “The current deal spread of 25 percent indicates the market believes one of the former is more likely.”
Vicki Anderson Granado, a spokeswoman for Energy Transfer, had no comment Tuesday.
Williams wants to close the transaction “as expeditiously as possible,” the Tulsa, Oklahoma-based company said after the close of trading on Jan. 15.
Williams agreed to sell itself to Energy Transfer Equity after a nine-month takeover battle. The transaction is expected to close in the first half of 2016, the companies said at the time.
The deal remains subject to the approval of Williams’ stockholders and other closing conditions, the company said in its most recent statement.
(Updates shares in second paragraph.)