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Williams Companies claim Energy Transfer Equity is breaching their merger agreement

Williams Companies (ticker: WMB) is suing Energy Transfer Equity (ticker: ETE) for breaching their merger agreement. In September of last year, ETE offered to acquire Williams for total consideration of $37.7 billion, representing a 10% premium on WMB’s stock prior to the opening bell on September 28, when the deal was announced.

Energy Transfer Equity initially offered Williams $53.3 billion back in June 2015, which was turned down by WMB due to “undervaluation.” The final offer included a cash option as opposed to an all-stock offer in the initial $53.3 billion offer, however.

The deal was initially marred by speculation that ETE might initiate a hostile takeover if a deal was not reached with the Williams board of directors, but it appears WMB has now turned the tables on Energy Transfer Equity.

ETE has sought ways out of the deal following the drastic decline in oil prices, reports the New York Times, but the only way to halt the merger is for Williams to pay a $1.5 billion breakup fee. WMB is now suing Energy Transfer and its CEO, Kelcy Warren, for breaching their merger agreement, claiming the company is providing preferential treatment for current ETE unitholders over soon-to-be unitholders.

Energy Transfer Equity recently disclosed a private offering that it would give a select group of investors, namely Warren and current unitholders, protection from future distribution cuts, should the MLP decide to go that route. When the deal was initially announced, ETE projected the acquisition would boost earnings by $2 billion, but cut that number 91% to $170 million.

Williams decided to sue ETE in the Delaware Court of Chancery to unwind the private offering, according to a statement Wednesday. It is suing Warren in the district court in Dallas, accusing him of wrongfully interfering with the merger.

Williams has commenced litigation to protect the interests of its stockholders,” the company said in the statement. “The litigation is intended to ensure that Williams’s stockholders will receive the consideration to which they are entitled under the merger agreement.”

In a securities filing on Wednesday, Energy Transfer said it “believes that it has complied, and it intends to continue to comply, with its obligations under the merger agreement with Williams and intends to vigorously defend against the claims made by Williams.”

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