Energy Transfer Equity L.P. (NYSE:ETE) notes that Williams (NYSE:WMB) floated a non-binding, conditional proposal to acquire Southern Union Company (NYSE:SUG) in a fully-taxable transaction to SUG shareholders. ETE believes its binding agreement provides superior value to SUG shareholders as compared to the Williams proposal.
From a price standpoint, ETE’s transaction is not a $33.00 per share offer as Williams contends. Rather, the ETE transaction is a tax deferred structure that provides SUG shareholders significant potential upside through at least an 8.25% annualized yield (paid quarterly) as well as the ability for SUG shareholders, at their option, to convert into ETE common units at a fixed exchange ratio of 0.770x after the first anniversary of closing. Tellingly, prior to withdrawing equity research coverage on ETE today, Williams’ own financial advisors, Barclays Capital and Citi, had stated target prices of $53.00 and $52.50 respectively, representing an additional 15+% upside from ETE’s closing unit price of $45.57 on June 23, 2011.
Furthermore, the Williams proposal does not have committed financing, may have negative ratings consequences for SUG, is subject to completion of due diligence and may have material anti-trust regulatory challenges.
In contrast, ETE’s agreement with SUG has been unanimously approved by the Boards of Directors of both companies, is not subject to any financing conditionality or ETE unitholder approval and is not expected to result in any anti-trust issues. In addition, ETE’s transaction has been reviewed by all the credit rating agencies and is expected to have no ratings impact on the current ratings of SUG.Additional Information In connection with the transaction, ETE and SUG will file a joint proxy statement / prospectus and other documents with the SEC. Investors and security holders are urged to carefully read the definitive joint proxy statement / prospectus when it becomes available because it will contain important information regarding ETE, SUG and the transaction. A definitive joint proxy statement / prospectus will be sent to stockholders of SUG seeking their approval of the transaction. Investors and security holders may obtain a free copy of the definitive joint proxy statement / prospectus (when available) and other documents filed by ETE and SUG with the SEC at the SEC’s website, www.sec.gov. The definitive joint proxy statement / prospectus (when available) and such other documents relating to ETE may also be obtained free of charge by directing a request to Energy Transfer Equity, L.P., Attn: Investor Relations, 3738 Oak Lawn Avenue, Dallas, Texas 75219, or from ETE’s website, www.energytransfer.com. The definitive joint proxy statement / prospectus (when available) and such other documents relating to SUG may also be obtained free of charge by directing a request to Southern Union Company, Attn: Investor Relations, 5444 Westheimer Road, Houston, Texas 77056, or from SUG’s website, www.sug.com. ETE, SUG and their respective directors and executive officers may, under the rules of the SEC, be deemed to be “participants” in the solicitation of proxies in connection with the proposed transaction. Information concerning the interests of the persons who may be “participants” in the solicitation will be set forth in the joint proxy statement / prospectus when it becomes available.
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