Williams Cos. is sticking to its $5.49 billion all-cash offer to buy pipeline company Southern Union Co., saying it’s a better deal for shareholders than Energy Transfer Equity LP’s bid.
Williams’s $44-a-share proposal provides more certainty and a better value than Energy Transfer’s cash-and-equity bid because it isn’t linked to a declining stock price, the Tulsa, Oklahoma-based company said in a statement Tuesday.
“If I was shareholder, I’d rather take $44 guaranteed all cash, rather than a combination of cash and stock in this volatile market,” Andy Levi, an analyst at Caris & Co., in a telephone interview, said. Levi doesn’t rate any of the companies involved in the deal nor does he own their stock.
Energy Transfer, based in Dallas, raised its bid to $44.25 a share on July 19, with up to 60% of the price to be paid in cash and the remainder in stock at a rate of one publicly traded partnership unit for each Southern Union share. It was the second time the company increased its offer to outbid Williams in an effort to complete the biggest purchase of a pipeline operator this year.
Energy Transfer has fallen 9.4 percent since its July 19 offer, when its units were trading at $43.53. Since Standard & Poor’s, the New York-based credit rating subsidiary of McGraw- Hill Cos., downgraded the U.S. to AA+ from AAA on Aug. 5, the S&P 500 Energy Index has fallen to 503.65 from 506.81, less than 1 percent.
Williams said its offer now represents a 4 percent premium to Energy Transfer’s proposal, based on Tuesday’s closing price for the pipeline partnership’s units, and assuming Southern Union shareholders elect the maximum cash payout. The company conveyed its thinking to the Southern Union board in a letter dated Tuesday.
“Southern Union’s current agreement with Energy Transfer includes illiquid partnership units whose value will be exposed to equity markets in the months until closing and beyond,” Alan Armstrong, chief executive officer of Williams, said in the statement.
Spokespeople for Southern Union and Energy Transfer didn’t immediately respond to voice-mail messages seeking comment.
The Williams release was issued after the close of regular trading on U.S. markets. Southern Union rose 77 cents, or 1.8 percent, to $42.40 at 5:03 p.m. in New York. Williams rose 5 cents to $28.20 at 4:42 p.m. and Energy Transfer was unchanged at $39.42.
On June 16, Energy Transfer first agreed to buy Southern Union in an all-stock transaction valued at $33 a share. Williams countered on June 23 at $39 a share in cash. On July 5, Energy Transfer boosted its offer and Williams responded on July 14 by bidding $44 a share.
Both buyers are vying for Houston-based Southern Union’s 15,000 miles (24,000 kilometers) of natural-gas pipelines, which connect new fields in Texas and Oklahoma to markets in the U.S. Midwest and Florida.
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