Ex-Williams CEOs, Tulsa Mayor Blast Energy Transfer Merger

  • The merger, once valued at $32.9 billion, has soured
  • Ex-CEOs say deal may take advantage of Williams shareholders

The mayor of Tulsa, Oklahoma, home to the headquarters of Williams Cos., is protesting the pipeline operator’s takeover by Energy Transfer Equity LP, saying the deal has no “economic merit” and may be “tragic” for the city and the company’s shareholders.

There is “no business or industrial logic” that justifies the merger, Mayor Dewey Bartlett Jr. said in a letter Tuesday that urged Williams shareholders to vote against it June 27. Bartlett’s plea comes less than a week after three former Williams chief executive officers raised similar concerns in their own letter to stockholders.

“My city will bear a very substantial cost for a transaction that destroys value for the shareholders it is supposed to benefit,” Bartlett said in his letter. “I don’t need to be a Wall Street banker or lawyer to recognize a one-sided bargain when I see one.”

Related: Energy Transfer Seeks Right to Bail Out of Williams Takeover

The merger, once valued at $32.9 billion, has soured on multiple fronts since it was first announced in September. The collapse in crude prices dragged the market value of both companies down by more than a third, straining the relationship between the two and throwing into question the economics of their deal. They’re now accusing each other of breaching the terms of their agreement and are scheduled to go to trial in the Delaware Court of Chancery later this month.

Williams declined to comment. Energy Transfer also declined to comment.

Segregated, Isolated

In a letter dated June 2, former Williams CEOs Joseph H. Williams, Keith E. Bailey and Steven J. Malcolm said the structure of the deal would allow Williams shareholders to be “segregated and isolated” and “taken advantage of” by Energy Transfer and its CEO Kelcy Warren.

Bailey on Monday confirmed by telephone that the three had sent the letter to shareholders. The other two weren’t immediately available for comment.

The former Williams chiefs said that the merger agreement requires the company’s board to recommend that shareholders vote for the deal. They said they know of at least five directors, including Williams CEO Alan S. Armstrong, who opposed the merger in September “and apparently still do.”

Energy Transfer was up 26 cents, or 1.9 percent, to $13.98 at 10:24 a.m. in New York trading. Williams was up 4 cents, or 0.2 percent, to $23.42.

‘Williams’ Independence’

A vote against the deal would preserve “Williams’ independence” and provides “the opportunity for substantial value accretion once the overhang of this transaction is gone,” the CEOs said.

Energy Transfer has said in filings that, upon completion of the deal, it would consolidate headquarters in Dallas and would need to “significantly reduce” the workforce in Tulsa.

A merger “could be tragic for WMB shareholders and the city of Tulsa,” Bartlett said in his letter. “For this I strongly protest and encourage all shareholders to do the same.”

Before it's here, it's on the Bloomberg Terminal.