Don't think this can be overcome. Transco is the best pipe franchise in the country, WMB will have growth opps for years. The merged co would be too big for an MLP form imo. Will see what operations numbers they put up.
ETE is continuing to evaluate the tax risks referred to above and has expressed its willingness to continue to
discuss the matter with WMB. Further, although ETE is fully committed to meeting its obligations under the merger agreement and using its reasonable best efforts to have the registration statement on Form S-4 declared effective so that WMB may proceed to a stockholder meeting to vote on the merger, ETE believes that there is a substantial risk that the closing condition relating to the 721 Opinion will not be met. Currently, neither ETE nor WMB has an estimate as to when the WMB stockholders are likely to learn the outcome of this issue, nor can either party provide any assurance that the outcome of this issue will be determined prior to the special meeting. If the closing condition relating to the 721 Opinion is not met or waived, and as a result the merger is not consummated, ETE expects to announce this outcome in a press release and file a Current Report on Form 8-K with the SEC regarding the same. See the section entitled “Risk Factors—Risks Related to the Merger—There is no assurance when or if the merger will be completed, and ETE believes there is substantial risk that the merger will not be consummated.”
From the S4, the tax opinion reasoning is weak, this has been the structure from the beginning.
Latham has recently advised ETE that it has concluded that there is a substantial risk that the IRS could successfully assert that the WMB Contribution would not be a transaction to which Section 721(a) of the Code applies based, in part, on the belief that the decline in value of ETE’s common units since the merger agreement was executed has increased such risk. In arriving at this conclusion, Latham considered and discussed with ETE claims that the IRS could possibly assert regarding whether the WMB Contribution would not be a transaction to which Section 721(a) of the Code applies, including the possibility that the IRS would successfully disregard the form of the transaction and, therefore, assert that a portion of the cash consideration being paid by ETE for ETC common shares, which cash will be used by ETC to fund the cash consideration in the merger, may be deemed paid by ETE to ETC for the Williams assets in the WMB Contribution. Latham has advised ETE that considering the potential claims that the IRS may successfully assert and the level of uncertainty regarding the ultimate outcome of these claims, Latham would not be able to deliver the 721 Opinion
were the opinion requested as of the date of this proxy statement/prospectus.
$2.40 dist at 9% yield, $27 unit price. Oil keeps moving and well into $20s is not a stretch. Still think $75 oil by end of the year is not impossible. The whole sector moves up. $60 to $80 oil solves lots of problems.
didn't print, Targa a 9% yield, probably a good comparison although their assets might be better. Oxy CEO said there are only 50 counties where oil is profitable currently, assets do matter. Delaware and Marcellus are probably the two best. Still seems this should be $20 plus at a minimum fairly quickly if comm prices keep moving. FR involvement is plus for growth. Not sure about management but will see.
Just hope the operating nos tomorrow look ok. First glance, looks like OKE/OKS did ok. Right now, still think standalone is better than taking on $6 billion in debt. Both cos would do well. But an all equity deal, need to sweeten it some, is ok but makes takes longer to realize the value, would be a very big co. No deal still seems prudent.
Right now, I hope you are right. I'll take my chances with WMB standalone. The institutional investors could care less about the long term, it's about a few dollar premium. The activists on the board want to sell. I do think WMB is probably worth high twenties at least now if the operating nos don't look awful tomorrow. OKE is yielding 7%ish now, and WMB coverage is not as good but the long term prospects are better, 7% yield on $2.56 is $37, discount it for the coverage and you have a $30 plus stock. The problem with the vote is there is no one promoting WMB's prospects standalone, they can't do it. I'm not sure the small owners will make much difference in the vote. All equity, 2x, that's my proposal, if you bent on a deal. If not walk. And I don't think the MLP form is appropriate for the size of co ETE/WMB would be. Let's hope it gets killed soon.
Listened to cc and if you accept 450mm ebitda or around that. $1.6 billion in debt, assuming the pref shs convert, 75mm units out. The unit price at 10x ebitda should be $38 which would equate to a 6%ish yield, not unreasonable for an MLP covering at 1.6x the dist. And no tax implications for buying this year, so they say. Where are you going to find a 13% yield. And they said spending for this year has already largely happened, no need for equity raises for a couple of years. As soon as the analyst start talking it up, it should move.
Could be, my opinion changes weekly, does seem the market is believing today that deal is on. The rest of the sector is down as is ETE. I am guessing WMB operating no out tomorrow will point to a higher WMB stock price, won't be great but will support higher stock price. And I do suspect that Warren wants this deal to be done with all equity, and that's just a guess. Warren wants to grow his asset foot print and still thinks Transco would help him connect the US shales. He is shrewd if nothing else and bent on growing, a deal junkie.
It's curious that there is no info about why the tax opinion couldn't be made and WMB doesn't agree with the tax opinion conclusion. Games are being played on both sides which is to be expected. Seems if the tax opinion is a deal breaker, ETE could terminate now without repercussions. This change indicates to me that is probably on with changes. All equity makes sense and resolves issues, conv pref plan goes away, tax free exchange, no additional debt, dist is probably safe. The synergies will come back if comm prices rebound so the reduction in those is bogus imo. I really don't care at this point whether it goes through or not. A rebound in the sector is much more important.
The shrewd investor that owned the second rate mortgage bank at $1500 per share and it's $20s now. Good job. Get over the communications spin off, no one cares.
Just a guess but I think he implemented that to get WMB to do what they did. IMO, the deal doesn't make it to a vote with that plan in place. To keep that plan for his insiders without the merger seems really egregious. He installed the plan to counteract the $6 billion add'l debt load. I do think WMB wins that challenge and Warren knew they would. Gets convoluted. Seems everyday I have different take.
You have a good point, still seems ETE wants out of the deal as structured currently. But suspect that with all equity, Warren might want to go through with it. He appears to be a shrewd negotiator. I own both cos and will keep both if the deal falls through or keep shares of the combined co. More importantly, we need $60 plus oil and a solid $3+ gas for either the merged co or the separate ones to succeed. About the only thing that can be said with certainty is this is not over and who knows where it ends.
Listening to replay, the repeat what they said in the release, those buying this year and holding won't have tax implications from the deal. Those that bought before this year, suspended losses should cover most if not all of gain. Not an accountant but seems they are certain. Seems CEQP at $2.40 dist should be yielding at least 10%.
With all equity, seems you wouldn't have to cut the dist, the $6 billion of debt is eliminated. ETE standalone imo is worth $14ish and WMB mid twenties. Seems $12 all equity 2x swap, $24 for WMB. Or about the same value standalone for WMB, indifferent imo. And ETE would have assets to shed in the merged co, Canada, Fla pipe, Geismar, SUN, not sure how that synergiizes with other assets. Pull it off with rising oil and gas prices over next couple of years and would look like a great deal. Or kill it and both cos have good prospects. WMB still owns the best pipe in the country. The original ETE deal didn't include cash, was 1.87x. At that ratio, WMB $22 and 2x $24. Anyway you cut it, WMB is undervalued. And ETE is probably more undervalued as standalone over the long haul.