Business Context and Reporting Period
This Form 8-K Current Report is filed by Energy Transfer Equity, L.P. (ETE) on June 29, 2016. The report details the termination of the Agreement and Plan of Merger dated September 28, 2015, between ETE, Energy Transfer Corp LP (ETC), and The Williams Companies, Inc. (Williams).
Key Financial Metrics
The filing does not provide standard financial performance metrics such as revenue, profit, cash flow, margins, debt, or liquidity for the reporting period. The document focuses exclusively on the legal and transactional status of the merger agreement.
However, the following financial figures related to the terminated transaction are disclosed:
- Proposed Merger Consideration: Williams shareholders were to receive $8.00 in cash and 1.5274 ETC common units, 1.8716 ETC common units, or $43.50 in cash per share.
- Proposed Ownership: ETE was expected to own approximately 19% of outstanding ETC common shares post-merger.
- Potential Termination Fee: If ETE prevails on specific breach claims, Williams could owe a termination fee of $1.48 billion.
Material Changes
The primary material change is the termination of the Merger Agreement on June 29, 2016. This action was taken because a critical closing condition was not satisfied: Latham & Watkins LLP was unable to deliver a tax opinion (the "721 Opinion") confirming that the contribution of Williams assets to ETE would qualify as a tax-free exchange under Section 721(a) of the Internal Revenue Code. The Outside Date for the transaction was June 28, 2016.
Outlook, Risks, and Contingencies
Litigation Status: Williams filed a lawsuit in the Delaware Court of Chancery on May 13, 2016, seeking to prevent ETE from terminating the agreement. On June 24, 2016, the court ruled in favor of ETE, finding it contractually entitled to terminate due to the failure of the tax opinion condition. Williams has appealed this decision to the Delaware Supreme Court.
Management Commentary and Risks: Management highlights several risks associated with the termination and ongoing litigation:
- The ultimate outcome of the pending litigation between ETE and Williams.
- Reactions from unitholders, customers, employees, and counterparties to the termination.
- Diversion of management time to transaction and litigation-related issues.
- Unpredictable economic conditions and fluctuations in the market price of ETE common units.
- The ability to maintain current credit ratings for ETE and its affiliates.
Investor Verification Checklist
- Verify the current status of the appeal filed by Williams with the Delaware Supreme Court.
- Monitor for any updates regarding the potential $1.48 billion termination fee claim asserted by ETE.
- Review subsequent filings for any impact on ETE's credit ratings or liquidity due to the litigation.
- Assess the impact of the terminated merger on ETE's strategic growth plans and capital allocation.