Southern Union Co. said Friday it would sit down with Williams to discuss its revamped $9.4 billion merger offer, putting the squeeze on Energy Transfer Equity LP (ETE), which already has an agreement in place.

Williams last Thursday upped the ante for the natural gas pipeline company with a $44/share cash offer, a bid 10% higher than ETE’s offer earlier this month (see NGI, July 11). ETE in mid-June launched a friendly $33/share takeover of Southern Union, followed a week later by Williams counteroffer of $39. ETE raised its offer to $40/share earlier this month. Southern Union closed at $43.42/share last Thursday.

In its latest proposal Williams has given Southern Union less than a week to finalize the latest transaction’s terms, asking for discussions to be successfully completed by Tuesday.

“Based on the due diligence we have completed to date, we have revised our forecasts and synergy estimates and are pleased to deliver Southern Union an enhanced proposal to acquire the company for $44/share in cash,” said Williams CEO Alan Armstrong. “We are more convinced than ever of the strategic and financial benefits of Williams’ acquisition of Southern Union. Our proposal offers more than just premium value and full liquidity to the Southern Union shareholders; it is designed to result very quickly in a merger agreement and provide certainty around financing and regulatory approvals. Williams is offering Southern Union a clear, direct path to the highest value for its shareholders.”

Based on the terms of its proposal, Armstrong said the company was “confident” that Southern Union’s board would “determine its superiority” to ETE’s amended agreement.

“For Williams, this is a compelling transaction that would be immediately accretive to cash flows and dividends as well as enhance long-term growth opportunities,” Armstrong added. “Our revised, superior proposal would allow us to further build upon our presence in premier markets while maintaining our financial flexibility and commitment to investment-grade ratings and supporting our high dividend strategy.”

The Williams proposal is not subject to any financing conditions, and the company said it is prepared to deliver bank financing commitments concurrent with signing the merger agreement. The Tulsa-based company said it also has “strengthened its commitment to gaining regulatory approval and will close the transaction on a timeline consistent with the proposed Energy Transfer transaction. Williams is committed to take all necessary actions to obtain federal anti-trust clearance and will otherwise provide the same degree of regulatory certainty as the proposed Energy Transfer transaction.”

Williams is prepared to “move quickly to consummate this transaction,” said Armstrong. “To that end, we believe that we can finalize terms of a potential transaction with Southern Union by Tuesday, July 19” based upon a schedule that began Thursday, in which Southern Union’s special committee of the board first would determine “that the enhanced Williams proposal is superior to the current Energy Transfer transaction. Southern Union opens its data room to the members of the Williams team that previously had access to the data room and otherwise cooperates fully with Williams’ due diligence efforts through Tuesday.”

From Friday to Monday Williams envisions that the management teams would meet to work out terms of the merger and on Tuesday the parties would finalize discussions, with Southern Union notifying ETE of its intent to accept the Williams proposal.

“For many reasons, adhering to the schedule is crucial to our proposal,” said Armstrong. “The similarity of our proposed merger agreement to the Energy Transfer agreement should enable the special committee to make a prompt finding that our offer is superior and much of the due diligence and preparatory work required to execute a merger agreement is behind us…It is clearly in the best interests of our respective shareholders.”

Separately ETE and Southern Union said late Wednesday they had filed a joint application with Missouri’s Public Service Commission requesting an order authorizing Southern Union to take “certain actions” that would allow ETE to acquire equity interests.

However, even with an agreement in place Southern Union stated in an 8-K filing Friday that if the board of directors didn’t consider Williams latest offer it “would be reasonably likely to constitute a breach by the board of its fiduciary duties.” The “board’s determination does not mean that it has determined that the second Williams proposal currently constitutes a ‘superior offer’ as defined in the amended merger agreement.”

On Friday Armstrong said Williams management was “confident that our all-cash, premium proposal is in the best interests of both companies’ shareholders, and we are pleased that Southern Union will engage in discussions…We look forward to working together with Southern Union and to quickly executing a definitive merger agreement.”

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