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Williams spurns $48 billion bid from pipeline magnate Kelcy Warren

Dallas-based pipeline magnate Kelcy Warren is leading a $48 billion bid for Williams Co., which the Tulsa company rejected. Warren shown in 2005 at a natural gas compression station near Cleburne.
Dallas-based pipeline magnate Kelcy Warren is leading a $48 billion bid for Williams Co., which the Tulsa company rejected. Warren shown in 2005 at a natural gas compression station near Cleburne. SPECIAL/BILL JANSCHA

Williams Cos. rejected a $48 billion takeover offer from Dallas pipeline magnate Kelcy Warren that aims to derail consolidation of the North American natural gas and oil hauler.

Williams said it had hired banks to explore alternatives to the offer that it said undervalued the group. In a statement, Energy Transfer Equity confirmed itself as the bidder and valued its offer at $64 a share, a 32 percent premium to Friday’s closing price.

Should a deal be done, it would rank near the largest in the pipeline industry. The biggest so far is Kinder Morgan’s consolidation of its partnership assets last year, valued at $48.9 billion, according to data compiled by Bloomberg.

“With Williams clearly potentially open for a sale, there will be a question as to whether others will join the bidding,” Abhiram Rajendran, a New York-based analyst for Credit Suisse Group, wrote in a note to clients. He called the possibility “remote.”

Williams shares (ticker: WMB) rose $12.52 a share, or 26 percent, to $60.86 on Monday, its highest level in more than 30 years. Energy Transfer fell 4.9 percent to $65.06.

Energy Transfer could raise its bid for Williams to around $70 a share, a number that would be difficult for Williams shareholders to reject and too high for Kinder Morgan and Enterprise Products Partners to match, Rajendran wrote.

The Energy Transfer offer depends on Williams abandoning its own pending $14 billion purchase of the units it doesn’t already own in Williams Partners LP, which feeds gas and crude from wells to larger pipeline systems.

Warren, a 59-year-old University of Texas-trained engineer, began building a pipeline empire in the 1990s that is now large enough to circle the Earth’s equator almost three times. With a net worth estimated at $7.2 billion, he is the 66th richest American, according to data compiled by Bloomberg. Texas Rangers co-owner Ray Davis served as CEO of Energy Transfer before retiring in 2007.

“Our board believes it is in the best interest of shareholders to conduct a thorough evaluation of strategic alternatives,” Alan Armstrong, chief executive officer of Williams, said in the statement.

Rival pipeline companies such as Kinder Morgan and Williams have begun consolidating their convoluted structures to reduce the need for payouts among affiliates. Warren has stuck with the master-limited partnership form, saying last month that his company needs both outside acquisitions and expansions of its pipeline system.

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