NEW YORK (The Deal) -- In a surprise announcement, Tulsa, Okla., oil and gas pipeline operator Williams Companies (WMB) said Sunday night it's exploring strategic alternatives, including a sale, after rejecting an unsolicited buyout offer for $64 per share, or $48 billion. Williams didn't name the suitor, but Dallas-based Energy Transfer Equity (ETE) said in a separate statement it made an offer for $53.1 billion, including debt.
The deal, which would come in the form of shares of a new Energy Transfer Equity C-corp with the same value, represents a 32.4% premium over Williams' closing price Friday of $68.39. The exchange would be 0.9358 of an ETE Corp. share for each Williams share and ETE Corp. would be publicly traded on the Big Board under the symbol ETC.
Williams said the proposal was contingent on canceling its $13.8 billion acquisition of Williams Partners (WPZ). Williams announced that deal on May 13 for 1.115 of a Williams share for each Williams Partners unit.
Williams said it carefully considered the deal with outside financial and legal advisers and determined that it "significantly" undervalues it and wouldn't deliver value "commensurate" with what Williams expects to achieve on a standalone basis and through growth initiatives, including buying Williams Partners.
Williams said it will continue to work toward closing the Williams Partners transaction through the strategic review process, which could include a merger, sale of Williams or continuing to pursue its operating and growth plan. Williams is expecting a third-quarter close if the deal is approved by Williams shareholders.
"Our board and management team remain committed to acting in the best interests of shareholders, and in light of the unsolicited proposal, our board believes it is in the best interest of shareholders to conduct a thorough evaluation of strategic alternatives," Williams CEO and president Alan Armstrong said in a statement. "Williams' premier infrastructure connects the best natural gas supplies to the best market and our strategy has provided substantial shareholder value allowing us to deliver a compound annual dividend growth rate of approximately 30% since we embarked on our strategy in 2012."
Armstrong added management expects the growth of the business and the benefits from the Williams Partners transaction will help the company achieve 10% to 15% dividend growth through 2020. "We are confident in our strategic plan and the significant value that will be created through the acquisition of WPZ and our large portfolio of growth projects," he said. "At the same time, we are open minded and committed to ensuring that Williams is maximizing value for shareholders."
Energy Transfer Equity said the offer, which has been in the works for six months, was made on May 19 to Armstrong and on June 11 and 18 to the company's board after Williams' announcement that it was buying Williams Partners. It thinks its offer is more compelling and is "disappointed" that it had to publicly confirm its offer for Williams.
"Unfortunately, until Williams' announcement today, Williams' management has inexplicably ignored ETE's efforts to engage in a discussion with Williams regarding a transaction that presents a compelling value proposition for its stockholders," Energy Transfer Equity said. "After the WPZ merger announcement, ETE believed that it had no other choice but to provide the detailed terms of its interest to the Williams board. Now that Williams has finally responded, ETE intends to engage with Williams to the extent that Williams undertakes a fair and even-handed process."
Energy Transfer Equity chairman Kelcy Warren said in a statement that he generally hasn't been supportive of transactions that involve the partnership's units as he believes they are significantly undervalued, but he believes the combination with Williams will create substantial value that wouldn't otherwise be realized. "I am truly excited at the prospect of bringing together these two businesses under a common platform and creating additional value for every stakeholder," he said.