Pipeline operator Williams agreed to acquire all of the outstanding shares of its master limited partnership (MLP), William Partners, for $10.5bn.
Image: Williams intends to simplify its corporate structure. Photo: courtesy of outgunned21/Freeimages.com.
The agreement is part of the firm’s restructuring plan in response to the US Federal Energy Regulatory Commission’s (FERC) revised policy issued on 15 March 2018.
The policy reversed FERC’s 2005 income tax policy that permitted master limited partnership (MLP) interstate oil and natural gas pipelines to maintain an income tax allowance in cost-of-service rates.
Williams, which currently owns 74% stake in Williams Partners, said in a statement: “Since that time, Williams and Williams Partners considered a number of alternatives relating to the FERC ruling and determined that the transaction described herein is in the best interests of Williams’ shareholders and Williams Partners’ public unitholders.”
As per the terms of the merger deal, Williams will purchase all of the 256.0 million public outstanding units of Williams Partners at a 1.494 ratio of Williams common shares per unit of Williams Partners.
In total, Williams will issue approximately 382.5 million shares in connection with the proposed transaction. This represents approximately 31.6% of the total shares outstanding of the combined entity.
Upon completion of the merger, which is expected in the fall of 2018, Williams Partners will become a wholly owned subsidiary of Williams.
Williams expects the transaction to simplify its corporate structure, streamline governance and maintain investment-grade credit ratings.
Williams president and CEO Alan Armstrong said: “This strategic transaction will provide immediate benefits to Williams and Williams Partners investors. Today’s announcement will maintain the income tax allowance that is included in our regulated pipeline’s cost-of-service rates.
“The transaction will allow Williams to directly invest the excess coverage in our expanding portfolio of large-scale, fully-contracted infrastructure projects that will drive significant EBITDA growth without the need to issue equity for the broad base of projects currently included in our guidance.”
Williams Partners has operations across the natural gas value chain including gathering, processing and interstate transportation of natural gas and natural gas liquids.