In the S4, if I read it correctly, it said up to the $500mm payment to WPZ, wasn't sure about up to. Again, I think this all started with the silly piece by David Faber on CNBC, chatter, he said that no discussions were taking place. Not responsible journalism. Still think ETE doesn't want to give away more stock, wants the cash but as someone said more equity 2.5x vs 1.87 would be fine, use the $6 billion for growth. No sense that the deal is $20 and $14 WMB price. Just fear in the markets.
The question is how many, probably just one, these boards are a good use for multiple personalities. Just wish they weren't so dimly lit. At least taking both sides of the argument, you could learn something with an informed poster.
You have to put in perspective that WMB paid 56 cent div two weeks ago, declared a month ago. And the yield is 18%. Seems there is a disconnect.
It is hard to fathom why the Saudis did this, they could have tweaked it down to $70 or whatever and not have opened it wide open, I think they may have miscalculated the resilience in US shale production. The midstreams will survive, the US could end up adding 500k b/d again beginning in 17, at lower prices. And gas demand plus exports look good which is ETE/WMB business. After we get through this, we won't have to worry about the Saudis anymore, the market will govern price, probably a good thing. Still seems the US is the swing producer and we will find out the price, could be $60, $70 or? The world can't be supplied at $30 or $40. And the e and p s going out of business, probably 90% of new volumes are added by a handful of e and ps and the majors. A lot of the small cos aren't that important. We probably needed this catharsis to reset supply and demand.
You will know in a few days, you really think they will cut the dist before the WMB deal is done, don't think so. They had better say that the dist growth is still intact or they will never get WMB owner to vote yes. Wouldn't bother me if either cut the dist some to fund more growth, would get it back in a few years.
ETE doesn't want to use more stock, dilution. If they upped the exchange to maybe 2.5x, could save the $6 billion in cash but again would dilute ETE holders which they didn't want to do. Today, think the deal as structured goes through or joint agreement to scuttle the deal, positive for both. WMB can deal with their balance sheet with an asset sale. The WPZ deal is off the table, good.
You will get an indication of the div in a couple of weeks, if they raise and confirm growth, maybe not.
Why can't they keep it as is? Maybe the market is wrong, not sure WMB can back out, expensive. Can or would ETE. Not sure about the legal ramifications. The S4 says they would be liable for some of the $500mm payment to WPZ. Could be a joint agreement to step aside I guess. My guess is both would go up. WMB can't merge with WPZ at current prices but they would have the ability to strengthen the balance sheet. Wouldn't mind if they called it off or it goes through at $20 value for $14 price today.
My opinion, the CNBC report which was pure speculation, raised the issue of the deal going through, uncertainty with oil touching $29, fear is in control vs rational thinking. ETE/WMB is a nat gas transporter primarily. If the deal goes through, should work out ok and if it falls apart, doubt it will as Kelcy Warren wants the WMB assets. They will probably have to sell a few assets to get the deal done which would reduce debt, probably not a bad thing, the Florida pipeline would be easy. If they did all equity, would have to raise the exchange to 2.5x, probably too much equity dilution for ETE but saves $6 billion in cash which could fund a bunch of growth over next couple of years. Would bet the deal gets done at current offer, next bet would be ETE steps aside, they would be liable for some of the payment made to WPZ for canceling their deal.
Buy WMB at $14, with ETE at $8, you get $8 x1.524 plus $8.10, a little over $20. The value of WMB doesn't make sense. If ETE walks, WMB could cut div 75%, a la KMI, 65 cents at 3.5%, KMI yield now, $18. Seems the worst case is priced in. I am guessing Warren will go through with the deal. Five years from now, will be looking back on this price as the buy of a decade. But it's hard for most to step up. ETE announces dist in a couple of weeks, probably raises to $1.20, a guess, an MLP with no growth should yield 10% max, $12 ETE price, exchange for WMB, $26 price. Kind of hard to see how this is not way overdone.
Which happens every week, kind of like your "massive nat gas withdrawal", happens every winter. Imagine that. You have no clue what is important vs just random noise.
For a while, their strategy was good until cancelled orders to stop the evil short sellers. That worked well.
Couple of speculations, assumes the cash part of the deal goes away, don't see how that happens unless WMB holders get more, more dilution to ETE. Or the deal falls apart, WMB owners reject it. Don't see ETE walking away or WMB. A recovery in comm prices and this merged co is going to look great in a couple of years, could be bumpy for a while. I do agree, buy WMB if you want ETE.
Since you like lower price, just thought you'd appreciate where it's going. May have to find in on the pink sheets when it's delisted but it will be worth it. Cheers.