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Half Of Williams Companies' Board Resigns After Failed Energy Transfer Equity Merger

A Williams Cos. employee monitors the company’s compressor station in Sumas, Wash.
Courtesy photo
A Williams Cos. employee monitors the company’s compressor station in Sumas, Wash.";

On Wednesday Dallas-based Energy Transfer Equity announced it’s going to stop pursuing its merger with Tulsa-based Williams Cos. 

Updated 8:25 a.m.

Nearly half of the board of directors of Tulsa-based Williams Companies resigned Thursday during an afternoon closed-door meeting where a coalition attempted to oust CEO Alan Armstrong.

The board members who resigned, including Chairman Frank MacInnis, said they thought Armstrong wasn't the right person to lead Williams as it charts a new course, The Wall Street Journal reports:

The directors not including Mr. Armstrong were split evenly, with six supporting Mr. Armstrong and six opposed. Mr. MacInnis, who had been Williams’s chairman since 2011, was opposed to Mr. Armstrong remaining as CEO, but resigned largely for personal reasons, one person said. Attempts to reach Mr. MacInnis for comment were unsuccessful. Five others followed suit, including Laura Sugg, a former executive at ConocoPhillips; Ralph Izzo, CEO of utility giant Public Service Enterprise Group Inc.; and Steven Nance, president of a privately held oil and gas company. All three had been supportive of the merger.

The board had been divided over the merger since it was approved last year, and one major investor told the newspaper the shake-up could help stabilize Williams after nine months of uncertainty.

ETE CEO Kelcy Warren had wanted to back out of the deal after the commodity downturn put the entire energy industry in a precarious financial position:

He worried that the $6 billion cash portion, which Energy Transfer planned to borrow, would saddle the combined company with too much debt, according to testimony aired in court last week. It is unclear whether Messrs. Meister and Mandelblatt, who teamed up to push changes, including exploring a sale at Williams, will keep their shares. The two had been longtime holders of the company’s shares, but took a more aggressive posture in late 2013, disclosing an 8.8% stake and a joint effort to get on the board.

Original Post

Williams is one of the largest employers in the state, and many people worried about jobs moving, or being eliminated outright if the merger went through. As you might expect, city and civic leaders were elated.

"We have maintained from Day 1 that this deal did not make good sense either for the companies involved, their shareholders, their employees, and certainly not for the city of Tulsa or the state of Oklahoma,” Tulsa Regional Chamber president Mike Neal said during a Wednesday news conference.

It took a year to get here, starting with ETE’s first bid for Williams in 2015. Williams declined, but said it would entertain other offers, and they came to terms with ETE by September for a deal that would create the fifth-largest energy companies in the world.

“I don't think anybody really realized how complicated this one would get. There were just a host of problems,” said The Journal Record’s managing editor Adam Brooks. “Some of the big ones were that Energy Transfer issued a bunch of new stock so that it could finance the deal. Maybe the biggest issue is that because of the change in the industry with energy prices being so low, it really changed what this deal was worth. Initially they thought it would save essentially $2 billion a year. [In] recent filings that value had dipped to $126 million a year. That's a drop of well over 90 percent.”

The deal seemed like it would close. On June 24 a high-ranking Delaware judge said ETE’s accountants acted in good faith as they analyzed the deal’s tax status, which was a condition of the merger, according to The Journal Record’s Sarah Terry-Cobo, who’s been following this story in detail:

Williams Cos. reiterated Wednesday it was appealing the Delaware chancellor’s decision allowing both parties to end the deal. Williams is seeking damages from Energy Transfer Equity, but court documents have not specified how much Williams is seeking. Oklahoma City University adjunct law professor Mitchell Gray said Energy Transfer Equity could prevail in the appeal if it could show the proposed merger agreement somehow wasn’t binding. He said he wasn’t familiar with the contract, so it depends on the facts within the documents.

Brooks said there could be fees and penalties for backing out of the deal, and they also could be shareholder lawsuits. The focus now shifts to how the deal affects Tulsa, which is how outgoing mayor Dewey Bartlett framed it during that Wednesday news conference.

“The reason that we’re so honed in on a company like Williams and any other company that has a major presence in Tulsa, is they bring the capability of investing hundreds of millions of dollars into this community,” Bartlett said.

Williams has spent decades investing in Tulsa, and revitalizing downtown and making the urban core relevant again.

“Williams is an important company in Tulsa. They're big in philanthropy. They employ a lot of people,” Communities are always going to be scared about things, but until energy prices really rebound then people are going to be looking for ways to save money, and that could mean more deals.”

The Business Intelligence Report is a collaborative news project between KGOU and The Journal Record.

As a community-supported news organization, KGOU relies on contributions from readers and listeners to fulfill its mission of public service to Oklahoma and beyond. Donate online, or by contacting our Membership department.

The Journal Record is a multi-faceted media company specializing in business, legislative and legal news. Print and online content is available via subscription.

Brian Hardzinski is from Flower Mound, Texas and a graduate of the University of Oklahoma. He began his career at KGOU as a student intern, joining KGOU full time in 2009 as Operations and Public Service Announcement Director. He began regularly hosting Morning Edition in 2014, and became the station's first Digital News Editor in 2015-16. Brian’s work at KGOU has been honored by Public Radio News Directors Incorporated (PRNDI), the Oklahoma Association of Broadcasters, the Oklahoma Associated Press Broadcasters, and local and regional chapters of the Society of Professional Journalists. Brian enjoys competing in triathlons, distance running, playing tennis, and entertaining his rambunctious Boston Terrier, Bucky.
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