Business Context and Reporting Period
This Form 8-K, filed on May 2, 2016, by Energy Transfer Equity, L.P. (Energy Transfer), reports the entry into Amendment No. 1 to the Merger Agreement originally signed on September 28, 2015, with The Williams Companies, Inc. (Williams). The amendment modifies the logistics of the proposed merger, under which Williams will merge into Energy Transfer Corp LP (ETC), a newly formed subsidiary of Energy Transfer.
Key Financial Metrics
This filing is a current report regarding a material definitive agreement and does not contain financial statements, revenue, profit, cash flow, margin, debt, or liquidity metrics for the reporting period.
Material Changes Versus Prior Period
- Form of Election Timing: The amendment mandates that the "Form of Election" (allowing Williams stockholders to choose their preferred merger consideration) will be mailed simultaneously with the proxy statement/prospectus, rather than as a standalone mailing.
- Election Deadline Adjustment: The deadline for Williams stockholders to submit their election forms has been changed from 30 days prior to closing to the earlier of (i) 20 business days after the mailing of the Form of Election or (ii) three business days prior to the anticipated closing date.
- SEC Review Status: The SEC issued a comment letter on April 25, 2016, requesting additional or clarifying disclosure. The companies are revising the proxy statement/prospectus to address these comments before resubmission.
Guidance, Outlook, Risks, and Contingencies
Outlook and Conditions: The merger remains subject to customary closing conditions, including the receipt of a specific tax opinion (the "721 Opinion") from Latham & Watkins LLP. Management disclosed a "substantial risk" that this tax opinion condition may not be satisfied based on the status of the registration statement as of April 18, 2016.
Risks and Contingencies:
- Regulatory and Approval Risks: The transaction requires approval under the Hart-Scott-Rodino Antitrust Improvements Act and approval by Williams stockholders.
- Tax Treatment Risk: There is uncertainty regarding the ability to obtain the intended tax treatment for the issuance of ETC common shares to Williams stockholders.
- Legal Risks: The filing notes the impact of lawsuits filed by Williams against the Partnership and its management.
- Integration Risks: Risks include the ability to realize cost savings, synergies, and the diversion of management time.
Forward-Looking Statements: The document contains forward-looking statements regarding the expected future performance of the combined company, which are subject to numerous assumptions and uncertainties.
Important Facts for Investor Verification
- Verify the status of the SEC review of the proxy statement/prospectus and the timeline for its effectiveness.
- Confirm whether the "721 Opinion" regarding tax treatment has been obtained, as its absence is a stated condition to closing.
- Monitor the progress of the Hart-Scott-Rodino antitrust review and the scheduling of the Williams stockholder vote.
- Review the full text of Amendment No. 1 (Exhibit 2.1) for specific legal modifications to the original Merger Agreement.
- Assess the status of ongoing litigation between Williams and Energy Transfer management.