Takeover adjustments: Williams shuffles plans as its deal with ETE creates world’s 5th largest energy company

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Williams will merge into an affiliate of Dallas-based ETE under the agreement by the boards of directors for both companies. Energy Transfer hopes to complete the transaction in the first quarter of 2016, following approval by Williams shareholders.

The merger will create the world’s fifth largest energy company, and the third largest in North America.

Related: What does Williams-ETE merger mean for Tulsa?

Energy Transfer is a master limited partnership. Its companies own and operate about 71,000 miles of pipelines transporting natural gas, natural gas liquids, refined products and crude oil.

For the first half of 2015, ETE revenues fell 19.2 percent to $21.97 billion. The MLP’s adjusted distributable cash flow rose 57 percent to $656 million, or 61 cents per unit.

Williams, through its 60 percent primary stake and 2 percent general partnership interest in the Tulsa-based Williams Partners MLP, owns more than 33,000 miles of pipelines within the U.S.

For the first six months of this year, Williams Cos. net income fell 24 percent to $184 million from $243 million.

Williams brings roughly 7,000 workers into the 27,000-employee portfolio of 20-year-old ETE. About 1,000 of Williams’ staff resides in the Tulsa area, making it the region’s 18th largest primary employer.

The Tulsa natural gas giant had turned down an unsolicited $53.1 billion offer from ETE three months ago. That bid came as Williams was moving to acquire the 40 percent of Williams Partners it did not already own.

With Monday’s merger agreement, Williams Cos. agreed to pay Williams Partners a $428 million fee to end that takeover. It retains its 60-percent hold of that master limited partnership.

That will give ETE a portfolio of three investment-grade MLPs: Energy Transfer Partners LP, Sunoco Logistics Partners LP and Williams Partners, which trades as WPZ.

In Monday’s press release announcing the merger, Williams Cos. CEO and President Alan Armstrong said the combined company will better handle today’s low energy prices.

Energy Transfer also projected that synergies from the merger would bring $2 billion in pre-tax earnings by 2020.

This deal extends a string of ETE acquisitions that stretch back to the takeover of the Louis Dreyfus’ NGLs storage, fractionation and transportation operations in 2011. It acquired Southern Union Co. and Sunoco Inc. the following year. The acquisition of Susser Holdings then carried ETE into refined products and convenience store operations.

Under Monday’s agreement, affiliate Energy Transfer Corp LP will acquire Williams for $43.50 per share. Stockholders may elect to receive a prorated cash amount and/or 1.8716 ETC common shares for each share of WMB stock. The ETC shares would be traded on the New York Stock Exchange under the symbol ETC.

Williams Cos. stockholders also will be entitled to a special one-time dividend of 10 cents per WMB share, to be paid prior to closing.

Energy Transfer projected immediate benefits to its cash flow and distributions upon closing, according to its press announcement Monday. Projected cost savings and anticipated commercial synergies exceeded expectations from early due diligence, officials said.

Williams Partners unitholders should see increased distributable cash flows from cost savings and synergies reaching up to $400 million per year, ETE projected.