Hostilities have climbed further in the once-friendly merger of Energy Transfer Equity LP (ETE) and the Williams Companies Inc. as the latter announced another lawsuit against its now-retreating suitor.
Williams has asked the Delaware Court of Chancery to prohibit ETE from relying on any failure to close the transaction by the current "outside date" of June 28, or any failure to obtain a favorable Section 721(a) tax opinion from Latham & Watkins LLP (ETE's outside counsel), as a basis for ETE to avoid closing the deal. Williams alleges that ETE has breached the merger agreement through a pattern of delay and obstruction designed to allow ETE to avoid its contractual commitments.
ETE responded that Williams' lawsuit -- its third piece of deal-related litigation -- will only delay the potential consummation of a deal.
"Before this suit was filed, we were making progress towards clearing all SEC [Securities and Exchange Commission] comments and believe we were close to finalizing the proxy statement/prospectus for the Williams stockholder meeting to vote on the merger," said Energy Transfer Partners LP CEO Kelcy Warren in a statement released Sunday. "We further believe that ETE's good faith efforts were reinforced by our recent agreement with Williams to amend the merger agreement to provide for a reduction of the time periods necessary for certain administrative matters."
However, previously during an earnings conference call Warren said the deal couldn't close as currently structured. "I'd like to be really direct about this. We can't close. We don't have a transaction that can close. I want to be very clear; we can't close this transaction," he told analysts on the call (see Daily GPI, May 5).
The ill-fated tie-up was proposed last September (see Daily GPI, Sept. 28, 2015), but since then the collapse in commodity prices has severely eroded the value of projected deal synergies (see Daily GPI, March 24).
"...[W]e believe that even if the Williams stockholders approve the merger, the merger will still not be able to close due to a failure of a material closing condition given the substantial risk that Latham & Watkins LLP will not be able to deliver the 721(a) opinion," Warren said Sunday. "Accordingly, we believe Williams' latest lawsuit is an attempt to gain undue leverage in and undermine future discussions regarding the pending merger and will only result in further delay."