Energy Transfer ends $33 billion Williams merger

FILE ? A gas pipeline under construction in the Bakken shale field near Belfield, N.D., Sept. 3, 2011. Litigation swirls around a supposedly ironclad merger agreement between the Williams Companies and Energy Transfer, Kelcy Warren?s pipeline empire. (Jim Wilson/The New York Times)

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The most abusive engagement in the energy sector ended Wednesday when Dallas-based Energy Transfer Equity terminated its merger with the Williams Cos.

The proposed merger of two pipeline giants and rivals represented a contentious case of buyer’s remorse for Energy Transfer in a deal that was considered a major coup before oil markets crashed further.

The $33 billion merger turned ugly when Tulsa, Okla.-based Williams sued Energy Transfer in April, alleging that its leadership was trying to blow up the deal and enrich themselves at the expense of shareholders. The termination allows both sides to walk away without paying breakup fees.

Williams shareholders had approved the merger on Monday.

Last week, a Delaware judge ruled Energy Transfer could terminate the deal after its attorneys contended their was uncertainty over whether the acquisition would be tax-free as planned. Williams said it was appealing to the Delaware Supreme Court.

Energy Transfer wins ruling opening Williams deal escape route
RELATED: Energy Transfer wins ruling opening Williams deal escape route

After Wednesday’s announcement, Williams reiterated that Energy Transfer breached the terms of the merger and had no right to end the deal. Williams said it will seek financial damages.

The deal, announced in September, would have created one of the nation’s largest pipeline and logistics companies. Energy Transfer had publicly sought for months to buy Williams, which has the naming rights to Houston’s iconic Williams Tower. But then energy stocks and oil prices continued to collapse late last year and through February. The deal would have included a combination of Energy Transfer stock, $6 billion in cash, and a special dividend to Williams shareholders.

In March, Energy Transfer CFO Jamie Welch, who helped design the merger, urged key Williams shareholders to vote against the deal, according to both the lawsuit Williams filed and reports in The New York Times. Welch was fired in February, and he is suing his former employer, alleging breach of contract.

Williams’ lawsuit seems to have been sparked when Energy Transfer issued more than 300 preferred shares in March. Critics, including Williams, claimed the move was intended to personally enrich Energy Transfer CEO Kelcy Warren, who bought more than half of the shares offered.