SUG lawyers ignore???
HOUSTON (Dow Jones)--Natural gas pipeline company Energy Transfer Equity LP (ETE) has told takeover target Southern Union Co. (SUG) that talking to a rival bidder would violate the terms of their multi-billion dollar merger agreement. The mounting tensions between natural gas pipeline company Southern and its suitors Energy Transfer and Williams Cos. (WMB) illustrate the stakes involved in a potential deal. The boards of Energy Transfer and Southern agreed on June 15 to a $4.2 billion takeover deal; a week later, Williams bid $5 billion in cash for Southern. The winning bidder, after the merger, would become the largest natural gas pipeline company in the U.S. In a June 25 letter filed Monday with federal regulators, Energy Transfer's lawyers told Southern's legal counsel that it thinks Southern's board "is not permitted...to engage in any discussion or negotiations with Williams." Energy Transfer's lawyers reiterated that their offer was a better deal than Williams's because it would offer more tax benefits and dividend yields, while casting doubt that Williams' could finance its deal or clear anti-trust hurdles. Representatives for Southern, Williams and Energy Transfer were not immediately available for comment. Lawyers representing Southern seemed to disregard the warning, however. In a letter dated June 26, Southern's legal counsel asked Williams to elaborate on how it will finance its bid for Southern and how it would smooth over any anti-trust concerns the federal government might have if the two companies merge. -By Ben Lefebvre, Dow Jones Newswires; 713-547-9201; firstname.lastname@example.org (END) Dow Jones NewswiresJune 27, 2011 17:04
I believe I read where WMB was asking for some confidential data from SUG and ETE stated that it would be damaged by the disclosures of the data. As far as courtrooms go, the only thing you are guaranteed of is a decision, not necessarily one based on the law or the facts. Its not wise to risk a $5B deal on the whims of some political hack judge.
ETE could never find a judge to sustain on this because all SUG was asking about was the financing for the higher offer initially.
ETE is not behaving in a classy manner and is only showing what many of us know already which is they are a financially weak GP with financially weak LPs. Distribution growth for ETE has been coming from increasing sharecounts from equity issuances by RGNC and ETP. They are not coming from higher dcf from either MLP.
Depending on the strength of the legal claim, I have seen this type of leverage allow the claimant (ETE in this case) actually cause themselves to be included in the deal for some percentage interest. Wouldn't that be something.
i agree its all about the language in the agreement
wmb doesnt want to delay any implementation longer then it has to.
therefore in my opinion all we are talking about is money for ete to walk away.
the break up fee is one matter this delaying tactic is another.
plus dont forget the enormous fees on both sides to delay this matter.
imho wmb will just come up with more money which they will label other then a break up fee.
they could call it ice cream who cares as long as ete is more richly rewarded.
wmb wants it now.
It all depends on the language that is in the definitive agreement between ETE and SUG. If there was an exclusive time period during which SUG was probited from discussing a deal with any third party, then they could be considered in breach of the agreement by talking to Williams. Remember, ETE was bound to perform on its part of the agreement or be subject to damages for its failure to do so. They might have felt that an exclusive time period was warranted under the circumstances. The excitement builds.
Furthermore, the ETE/ETP/RGNC group of MLPs do not have the balance sheet strength of WMB and WPZ. WMB became a force once it spun substantial assets to its two MLPs and then the two MLPs merged together to form a pipeline powerhouse in the form of WPZ.
ETE cannot match the WMB bid and they know it. Otherwise, you would match the bid rather than threaten legal action. There was an article in a financial publication indicating that 70% of SUG shareholders would most likely opt for cash because they are tax deferred entities that generally do not want to own MLP assets so a cash offer comparison makes WMB the winner and ETE knows it.
One thing to consider is that ETE may be using its legal leveage to enhance the breakup fee by ageeing to go away. IF the breakup fee was doubled to say $200 million as oppposed to the current amount of $100 million, that would amount to almost .90 per share, which could be paid out to unit holders next quarter.
You might be right on the anti- but Dan Duncan before he passed away taught EPD everything he knew-he was the most powerful man in the arena!His staff, the finest and ones you do not want to battle in any setting. They might take a secondary plant or mid piplene w/o gov concerns.
EPD ownes 38 millions shares of ETE. Do you think they might influence the outcome? Throw alittle cash in and get say some pipelines/processing to share with ETE/ETP? EPD is much bigger than Williams and come out of this a winner in the end.