Energy Transfer Equity to acquire Williams Companies for $37.7bn

US-based pipeline company Energy Transfer Equity (ETE) has agreed to acquire the Williams Companies (WMB) in a transaction valued at about $37.7bn.

The latest business combination between the companies is expected to create the third largest energy franchise in North America.

Earlier this year, the company had rejected a $48bn offer from Energy Transfer and is now selling the company for about a third less than the previous offer.

In June, it rejected the offer saying that the offer undervalues the company and would not provide value it can achieve on a standalone basis.

Since then, the value of the company has also dipped with the falling energy prices and outlook of oil companies remain lackluster.

ETE chairman Kelcy Warren said: "I believe that the combination of Williams and ETE will create substantial value for both companies’ stakeholders that would not be realised otherwise."

According to ETE, customers will also be able to invest in capital projects and efficiencies that cannot be achievable without the combination.

WMB president and chief executive officer Alan Armstrong said: "Williams’ intense focus on connecting the best natural gas supplies to the best natural gas markets will be a significant complement to the ETE family of diverse energy infrastructure.

"As a combined company, we will have enhanced prospects for growth, be better able to connect our customers to more diverse markets, and have more stability in an environment of low commodity prices."

During the course of its diligence process over the last ten weeks, ETE has identified significant commercial synergies which run across a broad spectrum, ranging from new revenue opportunities through new capital opportunities.

ETE expects that the anticipated tax, depreciation and amortisation (EBITDA) from the synergies will be more than $2bn a year by 2020.

As part of the merger, WPZ will retain its existing name and will remain as a publicly traded partnership headquartered with an ongoing presence in Tulsa, Oklahoma.

The transaction, which is slated for completion in the first half of 2016, is subject to customary conditions, including the receipt of approval of the merger from Williams’ stockholders and all required regulatory approvals.

Concurrently, the company has also terminated its deal it signed in May to acquire its affiliated partnership William Partners for $13.8bn.

Williams owns 66% partnership stake in William Parnership and after the termination of the deal, Williams will pay $428m.

---

Image: The combination between ETE and WMB will create the third largest energy franchise in North America. Photo: courtesy of supakitmod/FreeDigitalPhotos.net.