Williams Co. (NYSE:WMB) has rejected a $48 billion buyout offer from Energy Transfer Equity LP (NYSE: ETE). Williams’ board of directors has now authorized a process to explore a range of strategic alternatives following receipt of Energy Transfer Equity’s unsolicited proposal to acquire Williams in an all-equity transaction at a stated per share price of $64.00. The unsolicited proposal was also contingent on the termination of Williams’ pending acquisition of Williams Partners LP (NYSE: WPZ).
Williams has confirmed that the offer it received was contingent on the company not completing its pending corporate consolidation. The consolidation, announced in May, has parent company Williams acquiring its asset-holding subsidiary Williams Partners LP in an all-equity deal worth $13.8 billion. William said June 21 that the acquisition was moving forward.
After considering the unsolicited proposal, the Williams board determined that it undervalued Williams and would not deliver value commensurate with what Williams expects to achieve on a stand-alone basis and through other growth initiatives, including the pending acquisition of Williams Partners.
On June 21, reacting to news of the unsolicited offer, Jefferies analysts commented, “With a current share price of $48.34 (June 19 close), we note the ~$64/share unsolicited bid implies a ~32% premium. WMB's Board formally rejected the offer siting ‘it significantly undervalues Williams and would not deliver value commensurate with what Williams expects to achieve on a stand-alone basis and through other growth initiatives, including the pending acquisition of WPZ.’ We await more information with respect to the time table set for Williams to conclude its exploration of strategic alternatives.”
Jefferies analysts added, “While the announcement of the unsolicited bid could be viewed as a defensive move, we expect WMB shares to trade higher tomorrow. Conversely, as the proposed transaction is predicated on termination of WMB's pending acquisition of WPZ, units of the MLP may not respond as favorably.”
Williams has retained banking firms Barclays and Lazard to help evaluate whether the company should seek a sale, a merger, or continue along its current path.