Williams Files Lawsuit to save ETE Deal

The war of words between U.S. pipeline operators Williams and Energy Transfer Equity (ETE) has worsened after Williams filed a lawsuit to pressure its would-be buyer to proceed with their merger agreement.

Williams has accused ETE of trying to get out of the $20 billion deal and filed a lawsuit late on Friday seeking to prevent the Dallas-based firm from terminating its takeover over a tax issue or if the deal isn't closed by a June 28 deadline.

Williams said in a statement that ETE has used "delay and obstruction" to try and wriggle out of its agreement but ETE responded on Sunday by saying the lawsuit was an attempt to gain leverage in any future deal talks between the two companies and would delay any progress.

"ETE is disappointed that Williams, rather than seriously engaging in discussions regarding the existing transaction, has chosen to file a third separate lawsuit in the last six weeks regarding our pending merger," Kelcy Warren, the chief executive of ETE, said in a statement.

Williams declined to comment.

The lawsuit is the latest twist in what has been a testy transaction almost from the get-go.

Dallas billionaire Warren set his sights on Tulsa, Oklahoma-based Williams last year to transform his empire into one of the world's biggest pipeline networks, launching an unsolicited bid in June and reaching a deal in late September that was then worth around $33 billion.

The timing was poor. Oil and gas prices dropped significantly after it was announced, the companies' shares dropped sharply and investors started to worry that the $6 billion cash portion of the deal would saddle ETE with too much debt.

But the Williams' board, which was initially split on the transaction, came out in support of the deal as oil prices spiralled further south.

TAX ISSUE

Warren said on Sunday that circumstances had changed since the companies struck their deal, and suggested that Williams' board should revisit its recommendation that shareholders vote in favor of the merger.

Warren said that Williams has prevented ETE from reaching out to its board and did not respond to its requests before filing the latest lawsuit.

In recent weeks, ETE has said that it can't complete the acquisition because its lawyers can't guarantee that the deal will be a tax-free transaction for Williams shareholders. Obtaining a favorable opinion on the tax issue from Energy Transfer's lawyers is a requirement for the deal to close.

Williams has said it disagrees with the lawyers' assessment of the tax risks. It has remained steadfast to the original terms.

The stand-off, preceded by a lawsuit and a countersuit both alleging breaches of the agreement, underscores how acrimonious relations have gotten between the two sides.

Warren has said ETE would be open to a deal that would remove the cash portion of its cash-and-stock offer for Williams.

ETE has slashed its estimates for cost savings from the deal and warned it would likely have to cut its distributions to shareholders entirely next year if it has to complete it. The company has also said that it will have to cut jobs substantially in Williams' home state of Oklahoma.

Reporting by Parikshit Mishra