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Williams sues ETE, Warren over offering's 'interference' with merger

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Williams sues ETE, Warren over offering's 'interference' with merger

hassued andits leader, Kelcy Warren, over a March privateoffering that Williams said threatens the merger agreementbetween the two pipeline majors.

Williams filed a lawsuit against ETE in the Delaware Courtof Chancery seeking to unwind ETE's offering of series A convertiblepreferred units. Separately, Williams sued Warren inthe district court of Dallas County, Texas, for "tortious, orwrongful, interference" with the merger agreement between Williams andETE, executed in September 2015.  

Williams' board said it is unanimously committed to enforcingits rights under the merger agreement and to delivering the benefits of themerger agreement to its stockholders. "ETE has no basis to avoid itsobligations under the merger agreement," the board said in an April 6 newsrelease.

The Tulsa-based pipeline operator said it reviewed ETE'sprivate offering and "concluded it is a breach of the mergeragreement," according to the statement. "Among other things, theoffering provides select ETE investors with preferential treatment on ETEdistributions."

The lawsuits are meant to protect the interests of Williams'stockholders and ensure that they receive the consideration they are entitledto under the agreement, according to the board.

"Williams remains committed to working with ETE toensure the financial strength of the combined company, provided that all ETEand Williams investors are treated fairly and equitably," the statementsaid.

Williams said it remains committed to mailing the proxystatement and holding the stockholder vote to close the deal as soon aspossible. The transaction is expected to close during the second quarter, andintegration planning is already underway.

EnergyTransfer said the offering, completed March 8, would free up cash to supportits family of partnerships and offer protection to participating unit holdersfrom any distribution cut affecting common units. The offering could not bepublic because Williams would not cooperate on a registration statement, whichanalysts highlighted as a sign of the frosty relationship between the twoparties.

Theprivate offering wound up as a work-around to the setback because a privateoffering is not subject to SEC rules requiring the consent of Williams'accounting firm.

Underthe offering, participating unit holders would forgo a portion of futuredistributions on participating common units for nine fiscal quarters, startingwith the quarter ended March 31. The current ETE distribution is 28.5 cents perunit.

Holdersof the convertible units are to receive 11 cents per unit of ETE's distributioneach quarter, with the convertible units accruing 17.5 cents per quarter, thesame amount the participating holders are forgoing of ETE's distribution as itstands now. Those units then convert back to common units at a conversion priceof $6.56.

If theconversation date is in May 2018 and the Williams deal closes in the secondquarter, Jefferies LLC analysts estimated, each convertible unit will equate toabout 0.24 ETE common unit.

About31.5% of outstanding common units are participating, ETE said, adding thatWarren enrolled "substantially all" of his common units. He wasissued 187,313,942 convertible units of the 329,299,267 participation total.