Pipeline giants decide to call off their merger

The rockiest engagement in the energy sector ended Wednesday when Dallas-based Energy Transfer Equity terminated its merger with the Williams Cos., leaving both pipeline giants with foggy futures.

The much-litigated merger of two rivals with big Houston footprints became a contentious case of buyer’s remorse for Energy Transfer, following a deal that was considered a major coup before oil markets kept crashing.

The $33 billion merger turned ugly when Williams, headquartered in Tulsa, sued Energy Transfer in April, alleging that Energy Transfer chief executive Kelcy Warren was trying to blow up the deal and enrich himself at the expense of shareholders.

The termination Wednesday allows both sides to walk away without paying breakup fees, although Williams shareholders approved the merger on Monday. When the deal was first announced in September, the com-

panies planned to create the nation’s largest pipeline company.

“This is the energy soap opera,” said Stewart Glickman, who follows both companies for S&P Capital IQ. “The market fundamentals have changed, and Energy Transfer doesn’t want any part of this anymore.”

Last week, a Delaware judge ruled Energy Transfer could terminate the deal after its attorneys contended there was uncertainty over whether the acquisition would be tax-free as planned. Williams is appealing to the Delaware Supreme Court.

Williams reiterated Wednesday that Energy Transfer breached the terms of the merger and had no right to end the deal. Williams said it will seek financial damages.

Williams is left in unstable financial condition because of debt and declining revenues and needs to make cuts, Glickman said, while the bad experience could make Energy Transfer less aggressive in acquisitions.

“They’ve been a serial acquirer,” he said.

Energy Transfer operates about 71,000 miles of pipelines largely throughout Texas and the Gulf Coast. Energy Transfer also owns the Sunoco and Stripes fuel retail brands. Energy Transfer last year employed about 1,350 people in the region through all its subsidiaries. Energy Transfer also owns the 21-floor building at 1300 Main Street, known as Travis Tower.

Williams controls roughly 33,000 miles of pipelines with a stronger presence in the Northeast. In the Houston area, Williiams employs almost 900 people and has naming rights to the 64-story Williams Tower.

Energy Transfer had tried for months last year to buy Williams, but then energy stocks and oil prices continued their collapse. The deal would have included a combination of Energy Transfer stock, $6 billion in cash, and a special dividend to Williams shareholders.

As the deal began faltering early this year, Energy Transfer CFO Jamie Welch, who helped design the merger, urged key Williams shareholders to vote against the deal, according to the lawsuit Williams filed. Welch was fired in February, and he is suing Energy Transfer.

Williams stock rose 20 cents Wednesday up to $20.84 per share, but that’s down by 50 percent from $41.60 just before the deal was announced in September. Energy Transfer Equity climbed by 29 cents a share to $14.70, but that compares to more than $23 per share before the deal.