Williams management on Tuesday agreed to appoint under a mutual agreement two shareholders to the board that together control almost 10% of the company.
Soroban Capital Partners LP Managing Director Eric Mandelblatt is to be appointed "promptly," while Keith Meister, managing partner of Corvex Management LP, or a mutually agreed-upon "industry expert" would be appointed at the November board meeting. The board plans to nominate Mandelblatt to stand for election at the 2014 annual meeting, while Meister or an alternate would stand for election at the 2015 annual meeting.
Corvex and Sorobon, hedge funds that together control 9.96% of Williams, agreed to a customary standstill provision, as well as "individual and aggregate minimum share ownership requirements."
Williams CEO Alan Armstrong recently said the company’s management was "very well aligned" with the hedge funds on wanting to create more value for shareholders (see Daily GPI, Feb. 21).
Mandelblatt said he had followed Williams "closely" for 16 years. The chief investment officer (CIO) of Soroban previously was a founding partner of TGP-Axon Capital and also had been an equity research analyst covering Williams for Goldman Sachs & Co.
"This is an exciting time in the midstream energy industry in North America, and we believe Williams has among the industry's best assets with which to realize the significant growth opportunities that lie ahead," he said. "We believe Williams is uniquely positioned to continue its high rate of dividend growth through the end of the decade, driven by its high-quality existing assets and recent investments made in strategic areas where the cash flow growth is poised to positively inflect in coming years..."
Corvex and Sorobon combined have more than $2.5 billion invested in Williams, "reflecting what we believe is a truly special investment opportunity," said Meister. "Williams is a strong company with an attractive strategic position in an industry with powerful growth tailwinds..." Meister, also the CIO of Corvex, previously served as CEO and vice chairman of Icahn Enterprises LP.
Corvex and Sorobon agreed not to solicit proxies for the annual meeting this year or any other annual meeting while their designees are on the Williams board. They also agreed to vote their shares in support of all of the board nominees.
"Creating stockholder value is the top priority of the Williams board," Armstrong said Tuesday. "To that end, we appreciate the confidence that Corvex and Soroban have demonstrated in Williams via their substantial investments. We look forward to working with them as we continue to execute our short- and long-term plans and create sustainable stockholder value."
The Tulsa-based operator "has a longstanding policy of open communications with its shareholders and welcomes input toward our goal of enhancing value," said Chairman Frank T. MacInnis. The parties engaged in "numerous discussions related to the company's strategic plan to drive continued value creation..."
Since the hedge funds filed notice in December that they were acquiring shares, Williams stock has risen more than 18%, Tudor, Pickering, Holt & Co. analysts noted.
"We don't expect a significant strategic shift to emerge from the expanded board," which would grow to 13 seats, because most of the operator's financial/structuring levers "already have been pulled," said analysts.
The board "can influence major project decisions," but most of Williams value drivers between 2014-2017 "are not subject to board influence," such as commodity prices, execution in the Marcellus Shale and project management.