ETE's CEO Heads to Court over Williams Deal

Dallas billionaire Kelcy Warren will head to court on Monday to defend against allegations his pipeline company, Energy Transfer Equity LP , has purposely tried to scuttle a proposed $20 billion deal for rival Williams Cos Inc.

The two-day trial comes just days before Williams shareholders vote on June 27 if they want to accept the deal proposed in September by Energy Transfer Equity, or ETE.

While the deal was long-sought by Warren, who wanted to create one of the world's largest pipeline operators, Williams said he soon had buyer's remorse and began to search for a way out as an energy price slump deepened.

ETE has argued the deal cannot close because its lawyers at Latham & Watkins were unable to declare that it would be tax-free. The company originally raised the tax problem in April and rejected two possible solutions proposed by Williams.

Williams sued in May, accusing Warren, who maintains a tight grip on ETE as its chairman and chief executive, of failing to meet its obligation to try to get the merger done by June 28, when ETE can walk away without penalty.

Williams wants the judge to order that ETE cannot avoid its obligation to close based on the tax dispute or the June 28 termination date.

ETE countersued, alleging Williams was the one breaching the deal.

Brian Quinn, a professor at Boston College Law School, said ETE wants to reach June 28 so it can walk away without any settlement cost. "I think it's all about hanging on about as long as possible."

In addition to Warren, both sides said they may call Alan Armstrong, the CEO of Williams. When Williams' directors voted to support the deal in September by a margin of 8-5, Armstrong voted against it.

Other potential witnesses include Frank MacInnis, the chairman of Williams and several tax lawyers at Latham and other firms.

The trial is being held in Georgetown, Delaware, in the state's Court of Chancery before Vice Chancellor Sam Glasscock.

By Tom Hals