Energy Transfer Equity buying Williams Cos. for $32.61B

SunTrust Robinson Humphrey upgrades its rating on Valero Energy Partners LP (NYSE:VLP). Under terms of the deal, an Energy Transfer affiliate, Energy Transfer Corp., will buy Williams at an implied price of $43.50 a share in cash and stock, which represents a 4.6% premium to Friday’s closing price.

Energy Transfer Equity, L.P. (Energy Transfer Equity) is a limited partnership company. (WMB -8.6%), as shares in the two oil and gas pipeline companies sell off sharply.

Williams’ crown jewel is Transco, the largest USA gas pipeline system. “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”. Williams has contracts underwriting at least $2.5 billion to enlarge Transco, according to the company’s May investor presentation. The Susquehanna Supply Hub is expected to be capable of delivering more than 3 Bcf/d of Marcellus Shale production into four major interstate gas pipeline systems.

(Credit: AP)Energy Transfer had earlier this year hinted at a hostile bid for Williams after pursuing a tie-up with Williams for months and announcing in June that Williams had rejected its $53.1 billion all-equity offer including the assumption of debt and other liabilities. Kinder Morgan’s market value is now about $67 billion. “I believe that the combination of Williams and ETE will create substantial value for both companies’ stakeholders that would not be realized otherwise”, said ETE Chairman Kelcy Warren.

Williams Partners said on Monday it would terminate the deal and receive $428 million in termination fee from Williams Cos.

Energy Transfer announced June 21 it had offered $48 million in stock for Williams.

Energy Transfer Partners (NYSE:ETP) last posted its earnings results on Wednesday, August 5th. Williams said then that it would explore alternatives as part of a strategic review, effectively launching a bidding war in which ETE emerged the victor on Monday.

We rate WILLIAMS COS INC (WMB) a BUY.

Williams had said that deal would simplify its structure, reduce taxes and generate cash for expansion projects. It is handled by its own general partner Energy Transfer Partners GP, L.P. Its brands include Sunoco, Stripes, Aplus, Aloha Island Mart, Valero Exxon, Mobil, Shell and Chevron, among others.