Energy Prospectus

Dallas-based Energy Transfer Equity LP (NYSE: ETE) has won out the deal to take over The Williams Companies Inc. (NYSE: WMB) after months of negotiation.

In a statement released on Sept. 28, Tulsa, Oklahoma-based Williams Cos. announced that it had accepted a $37.7 billion acquisition deal from ETE, including the assumption of debt and other liabilities.

The board of directors of both companies approved the deal, which will create the world’s largest operator of infrastructure for the movement and processing of oil and natural gas.

The agreement ends a takeover fight that began in June, when ETE first proposed an unsolicited $53.1 billion bid to Williams, which the company rejected.

The board of the companies were reportedly meeting again to consider the buyout earlier this month. Reuters reported that at the time ETE had offered to adjust its all-stock offer for Williams that stood at roughly $34 billion by offering to pay roughly 15 percent of the deal in cash.

Energy Transfer will pay $43.50 per share, which is 4.6 percent higher than Williams' Friday closing price of $41.60. Shareholders can either take Energy Transfer Corp. shares, cash or a combination of both.

ETE won the battle, but its shares have gotten murdered. Why an accretive deal kills a stock beats me.

Kelsy Warren, ETE's Chairman and CEO, is a very sharp guy with a very strong financial team. They would never do a deal this size if they did not think it was a good move for the company.
The whole market and all of the MLPs are down big today, so I would not read too much into today's price movement of the unit prices.

If my sums are correct, Kelcy Warren owns about 80 million shares of ETE, worth around $1.6 billion, and about 2.6 million shares of ETP, worth around $100 million. I would guess ETE is the better long-run bet.