Williams Gas Company
On June 21, natural gas pipeline powerhouse Williams Companies, Inc. rejected an unsolicited $53-billion, all-equity bid from Energy Transfer Equity, L.P.. Williams controls over 33, 000 miles of pipelines in the United States.
Energy Transfer believes its existing pipeline network, which is mainly in the South and Midwest, is a perfect complement to Williams’ network, which is mostly in the Northeast near the massive Marcellus gas fields.
But Williams Companies said the bid undervalues the company. Particularly in light of its offer to reabsorb Williams Partners L.P. for $13.8 billion. Williams Companies says that deal will allow it to raise dividends and lower borrowing costs while increasing capital spending.
But Energy Transfer’s offer is contingent on Williams Companies abandoning the pursuit of Williams Partners, its limited partnership entity.
With its proposed deal for Williams Partners, Williams Companies is following the script first written by Kinder Morgan, Inc. that moves away from the limited partnership model. Kinder consolidated all of its partnerships into the parent company in a $78-billion deal, saying the limited partnership model was too cumbersome for a company of its size to grow.
A Philosophical Dispute
This rebuff of Energy Transfer Equity by Williams Companies is really all about which model is believed to be best for running U.S. energy infrastructure most profitably: The master limited partnership model championed by Energy Transfer, or the C corporation model favored by Kinder Morgan.
Under terms of the offer by Energy Transfer, Williams Companies shareholders would receive stock in a new entity, a C corporation called ETE Corp., which would have a separate stock exchange listing. The limited partnership entities of both companies would remain intact.