Pipeline giant Williams Companies Inc. WMB has declined an unsolicited buyout offer worth $48 billion. Though Williams did not mention the name of the bidder, media sources believe that the firm is Energy Transfer Equity ETE.
The proposal involved an all-equity deal of $64 per Williams share, a 32% premium to Friday, Jun 19, closing price of $48.34. However, the company feels that the proposal would undervalue its business and hence, rejected the offer. Williams’ believes that it can achieve higher growth on a stand-alone basis and through the recently proposed Williams Partners L.P. WPZ merger.
Williams also mentioned that the proposal was contingent on it terminating the proposed Williams Partners acquisition.
The company expects to significantly benefit from the Williams Partners acquisition. The transaction will result in reduced cost of capital and higher tax benefits. Williams believes that these strengths should facilitate 10–15% dividend growth through 2020.
Post this offer, Williams plans to perform a thorough evaluation of a range of strategic alternatives which include merger, sale of the company or continuing operations per its current growth plans.
Williams is a premier energy infrastructure provider in North America. The company’s fee-based, long-term contracts offer some cushion against the current crude price weakness. However, the company’s margins continue to reflect the effects of low commodity prices.
Williams Companies currently carries a Zacks Rank #3 (Hold).
A better-ranked player from the midstream energy space is EQT Midstream Partners, LP EQM, which sports a Zacks Rank #1 (Strong Buy).
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