Williams Cos to Buy Affiliate Williams Partners

Williams Cos said on Wednesday it would buy affiliate Williams Partners LP for about $13.8 billion, the latest in a series of deals in the oil and gas pipeline industry as operators look to simplify their corporate structure.

Master Limited Partnerships (MLPs) are also being bought out to eliminate incentivized distribution rights that can divert a large chunk of cash returns to general partners.

Distribution payouts are becoming a burden for energy companies at a time when they are struggling to cope with a steep fall in global crude prices.

Crestwood Equity Partners said last week it would buy Crestwood Midstream Partners to cut out incentive distribution rights.

Williams Cos is offering 1.115 of its own shares for each Williams Partners' share. The offer works out to $55.86 per share, an 18 percent premium to Williams Partners' Tuesday close.

William Cos' shares were up 8 percent, while William Partners rose 27 percent to trade at $60.

The combined company said it expects third-quarter dividend of 64 cents per share. Williams previously expected to pay dividend of 60 cents per share, while Williams Partners was expecting to pay out 85 cents.

The companies said the deal would reduce cost of capital, freeing up funds for acquisitions. Lower capital cost would also drive a 10-15 percent dividend growth rate through 2020.

Barclays (BCS) and Gibson Dunn were financial and legal advisers, to Williams. Evercore was financial adviser to Williams Partners, while Baker Botts was the legal adviser.

Reporting by Sneha Banerjee