Enterprise Products Approached Williams over Acquisition

Enterprise Products Partners LP approached Williams Companies Inc earlier this summer about combining their businesses, two of the largest U.S. oil and gas pipeline operations, people familiar with the matter said.

Merging Williams' natural gas liquids business in the northeastern United States with Enterprise's ATEX pipeline, which runs from that region to Texas, could generate significant revenue and cost synergies for Enterprise.

The approach came as oil prices began to recover from a steep slump. Its timing suggests that Enterprise was looking to take advantage of Williams' depressed share price as well as upheaval at its board.

Enterprise's approach came after peer Energy Transfer Equity LP terminated its merger agreement with Williams in June after a prolonged legal battle.

The value of Enterprise's offer could not be learned. However, a rise in Williams' shares in the past two months means the offer currently carries little or no premium, one of the people said. Williams never made an official response to the approach, that source added.

Enterprise has not pursued the matter further either, the source said.

The sources asked not to be identified because the discussions were confidential. Williams and Enterprise declined to comment.

Since the deal with Energy Transfer broke up, Tulsa, Oklahoma-based Williams has laid out plans to move forward as a stand-alone company while investing more than $1.5 billion in its master limited partnership, Williams Partners LP. Williams and Williams Partners have taken steps to sell assets to reduce their debt loads.

Shares of Williams rose as much 11 percent after Reuters was first to report on Enterprise's approach and ended trading on Thursday up 7.8 percent at $28.11. Enterprise shares closed down 2 percent at $27.02, giving the company a market capitalization of $57 billion.

A Delaware judge ruled in June that Energy Transfer could terminate its deal to buy Williams over tax issues. The deal had been in doubt for months, with Williams suing Energy Transfer, accusing the company of breaching the terms of their merger in trying to back out.

Energy Transfer had become unhappy with the deal as oil's prolonged downturn put many of its and Williams' customers - major oil and gas producers - in jeopardy, driving down the value of both companies.

Energy Transfer pushed for a breakup of the deal even as oil prices climbed back, troubled by the debt it would need to incur to fund the cash portion of its bid.

Shortly after the collapse of the Energy Transfer Equity-Williams deal in June, nearly half of Williams' board resigned following a failed attempt to oust Williams Chief Executive Alan Armstrong.

Two of Williams' largest shareholders, Corvex Management LP and Soroban Capital Partners LP, have been agitating for change at the company for years. The top executives at the fund, Keith Meister of Corvex and Eric Mandelblatt of Soroban, had held board seats and were among the directors to step down.

Corvex has urged Williams to revamp its board, and Williams has said it plans to appoint three new, independent directors.

The deadline for shareholders to nominate candidates for Williams' board of directors is Aug. 25.

Reporting by Mike Stone and Michael Erman