Found this interesting tidbit in an article in the Tulsa World.
"Williams was pursued aggressively by Energy Transfer CEO Kelcy Warren, who founded the company in 1995. Warren, one analyst said, usually “gets what he wants.”
In this case, Warren took extraordinary steps to increase his chances of success with Williams.
One example is that ETE hired 10 banks to advise on its acquisition, mainly to corner the market on such expertise and keep others from using the institutions, according to an unnamed source cited by the Wall Street Journal.
The banks were Goldman Sachs Group Inc., Citigroup Inc., Bank of America Corp., Deutsche Bank AG, UBS Group AG, Credit Suisse Group AG , Morgan Stanley, JPMorgan Chase & Co., RBC Capital Markets LLC and Intrepid Partners."
The only reason WMB is going down is because ETE is going down. Of course, I'm sure you'll say that the reason ETE is going down is because of WMB. Who knows. My guess is when the dust settles and this transaction finalizes next year, ETE (and thus WMB) will be higher.
Any reason you'd buy WMB instead of just buying ETE? If I didn't own any WMB, I'd probably just buy ETE and avoid the hassles of the transaction down the road. There is a slight discount buying WMB due to uncertainty the deal will go through, but for me it wouldn't be worth the headache.
It's very common for the acquiring companies stock to go down right after a deal is announced. The company getting bought out USUALLY goes up because most companies pay a fairly large premium (often 10%- 30%). In this case ETA paid only a 4% premium. So, basically there was no premium and ETAs stock sank which makes WMBs stock tank also. If you take ETAs current price (around $19) and multiply by 1.87, you will approximate WMBs price of $35. WMB's price will remain slightly discounted (per the calculation) due to the uncertainty of whether the deal will go through.
Also, the market just happened to tank on the day the deal was announced. I think the deal might be a decent deal, but you can't tell that by the stock movement. Way too early for that. Check back next year when the deal closes and things may be better.
There is zero incentive for ETE to "get their price down". Using your logic, they'd be happy to be trading for zero, that way they'd would have gotten WMB for Free!
You'll get 1.87 shares of ETC for every 1 share of WMB you own. ETE's or WMBs price at that point are meaningless.
Only the cash part will be deemed a sale. If you were to decide you want only ETC stock (and no cash), then this deal would be non-taxable to you. Your basis in ETC would be the same basis you had in WMB. Only when you sell ETC would you have a tax issue.
WMB/ETC will provide guidance on how the taxes will work. Only the cash part will be taxable. Unfortunately, I've been through a few of these part cash/part stock deals. The taxes can be a pain in the butt.
I agree that ETC's price should be the same as ETE's. They're changing from an MLP to a C-Corp. I wouldn't think that would change the price, but I've never come across a deal that this happened.
You don't understand the deal. The final price (in WMB shares value) could be $20 or $120. If you hang on to your WMB shares until the date the deal goes into effect you will receive 1.87 shares of ETC (ignoring the cash proration part) for every share of WMB you have at the time. If ETC has a $15 value at that point then you've basically been given $28 per WMB share. If ETC is at $30, then your WMB shares are worth $56. The $43.50 value given to the deal was based on the price ETE was trading for on the date the deal was finalized. ETE should (for the most part) trade in lockstep with WMB until the deal is done. If ETE goes up 5%, then WMB should go up approx. the same percentage. There will be small differences.
The price of WMB will probably be a little less than the 1.87 x ETE would indicate. The difference will be due to the probability that the deal won't go through. As the deal gets close to finalizing, the small difference will disappear.
Worst case is $43.50? Really? Do you have any idea of how the deal works? The final value will be based strictly on what Energy Transfers price is at the time the deal is finalized. The $43.50 value is what the deal was priced at when they made it. It could be lower or higher in the end. Until the deal goes through you will see WMB's stock price go up and down in lockstep with Energy Transfers stock price.