Activist Urges New Williams Directors to Consider Merger

Updated on
  • Keith Meister of Corvex writes open letter to new directors
  • Williams shares are up more than 45% since ETE deal collapsed

An activist investor waging a proxy battle against Williams Cos. said the pipeline giant’s three newly-appointed independent directors should form a committee to examine the merits of a possible merger with Enterprise Products Partners LP or others.

The open letter from Keith Meister at Corvex Management LP follows the announcement last week by Enterprise Products that it was no longer interested in buying Williams because of a “lack of engagement” on the part of its target. Meister argued that the midstream energy sector is "rapidly consolidating," citing Enbridge Inc.’s $28 billion takeover of Spectra Energy Corp. announced on Sept. 6 as evidence.

“Cost of capital is critical in the midstream business and scale goes hand in hand with cost of capital,” Meister wrote in the open letter on Monday. Enterprise’s withdrawal “makes it crystal clear to me both that the current board is not functioning properly and that it is imperative to quickly populate the board with a majority of qualified, independent directors.”

Meister’s blasted the Williams board repeatedly since early July when he and five other directors resigned after failing to oust Williams Chief Executive Officer Alan Armstrong in a dispute over strategy. That followed the unraveling of a deal for Energy Transfer Equity LP to buy Williams for $33 billion -- a deal Meister had long supported and Armstrong had long opposed. 

Armstrong said in an interview last month that he’s focused on running the pipeline operator as a standalone company. Since then, Williams has embarked on a series of moves designed to focus operations on transporting natural gas. That’s included the sale of its Canadian assets and the announcement that it may sell its stake in a Louisiana complex that produces natural-gas liquids.

Proxy Battle

Williams’ shares have risen by more than 45 percent since Energy Transfer walked away from its plan to buy the company. They were up 1 percent to $30.36 as of 11:29 a.m. in New York trading on Monday.

In August, Meister launched a proxy battle aimed at replacing all six of the remaining Williams directors, comparing them to inferior athletes and saying they’re unwilling to disagree with Armstrong. On Monday, Meister said the three new Williams directors -- Stephen W. Bergstrom, Scott D. Sheffield and William H. Spence -- have the "experience and reputations commensurate" with steering the company.

Meister suggested the three form a "strategic review committee" and hire financial advisors from banks such as Barclays Plc or Lazard Ltd. to help out.

“Let me be clear, my proxy contest is not a mandate to sell the company,” he said. “It is about a fundamental governance question: shouldn’t a company with world class potential such as Williams have world class directors?”