Bloomberg News

Williams Offers to Acquire Southern Union for $4.86 Billion

June 23, 2011

(Adds size of merged companies in seventh paragraph.)

June 23 (Bloomberg) -- Williams Cos. offered to buy pipeline company Southern Union Co. for $4.86 billion in cash, topping a bid by Energy Transfer Equity LP.

The Williams offer values Southern Union at $39 a share, according to a statement today from the Tulsa, Oklahoma-based company. That’s $6 a share, or about $750 million, more than the June 16 sale price announced by Southern Union and Energy Transfer.

Williams, which wants to use Southern Union’s lines to connect to new sources of natural gas in the Permian Basin and Granite Wash fields in Texas and Oklahoma, said its offer isn’t subject to a financing contingency. Energy Transfer’s offer calls for it to issue new units and exchange them for existing Southern Union shares.

“Our proposal provides significantly greater value to all Southern Union shareholders than they would receive from Energy Transfer and a path to realize such premium value that is more transparent, more expedient and more certain,” Alan Armstrong, chief executive officer of Williams, said in the statement.

Energy Transfer President Kelcy Warren did not respond to a call seeking comment and a spokeswoman for the company did not respond to a phone call and e-mail seeking comment. Southern Union officials did not return calls seeking comment.

Armstrong said in a telephone interview that Williams made an offer to Southern Union within the last year. Williams executives tried to contact Southern Union before making today’s offer and weren’t successful, he said.

Spinoff Planned

The purchase would make Williams the largest interstate natural-gas shipper, with a capacity of 22 billion cubic feet a day, Armstrong said.

Under the terms of its agreement with Energy Transfer, Southern Union must pay Energy Transfer $92.5 million if it accepts a higher offer before July 25 and $135 million if it does so after that date.

Williams announced Feb. 16 that it will spin off its oil and gas exploration unit. The Southern Union purchase will not affect that split, according to the Williams statement.

The offer was announced after the close of regular trading on U.S. markets. Southern Union rose $5.05, or 15 percent, to $39.20 at 4:29 p.m. in New York. Williams was unchanged at $29.23, and Energy Transfer fell $1.71, or 3.8 percent, to $45.57.

Barclays Plc and Citigroup Inc. are serving as Williams’s financial advisers. Cravath, Swaine & Moore LLP and Gibson, Dunn & Crutcher LLP are its legal advisers.

Evercore Partners Inc. is advising Southern Union, and Credit Suisse Group AG is working with Energy Transfer. Locke Lord Bissell & Liddell LLP and Roberts & Holland LLP are providing legal advice to Southern Union, and Latham & Watkins LLP and Bingham McCutcheon LLP are counseling Energy Transfer.

--Editors: Charles Siler, Susan Warren

To contact the reporter on this story: Mike Lee in Dallas at mlee326@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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