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Williams takes further legal action against ETE on Friday 

On Friday, May 13, The Williams Companies (ticker: WMB) filed an action in the Delaware Court of Chancery seeking a Declaratory Judgment and Injunction preventing Energy Transfer Equity (ticker: ETE) from terminating or otherwise avoiding its obligations under the merger agreement it entered into with Williams on September 28, 2015. Williams said it asked the Court to prohibit ETE from relying on either (i) any failure to close the transaction by the current “Outside Date” of June 28, 2016 or (ii) any failure to obtain a Section 721(a) tax opinion from Latham & Watkins LLP (ETE’s outside counsel), as a basis for ETE to avoid fulfilling its obligation to close the proposed transactions with Williams.

In a press release, Williams said it alleges that ETE has breached the Merger Agreement through a pattern of delay and obstruction designed to allow ETE to avoid its contractual commitments. Williams believes that the Merger Agreement prevents ETE from doing so.

“The Williams Board is unanimously committed to enforcing Williams’ rights under the Merger Agreement entered into with ETE on September 28, 2015 and to delivering the benefits of the Merger Agreement to Williams’ stockholders. This action was filed with that goal in mind. The Williams Board has not changed its recommendation “FOR” the Merger Agreement executed on September 28, 2015,” the Williams press release said.

Williams had earlier commenced separate litigation against ETE and its chairman and chief executive officer Kelcy Warren in response to the private offering of Series A Convertible Preferred Units that ETE disclosed on March 9, 2016. The litigation against ETE in the Delaware Court of Chancery seeks to unwind the private offering of Series A Convertible Preferred Units. The Delaware Court of Chancery has granted Williams’ motion to expedite the litigation. The litigation against Kelcy Warren in the district court of Dallas County, Texas, is for tortious, or wrongful, interference with the Merger Agreement executed on September 28, 2015 as a result of the private offering of Series A Convertible Preferred Units.

Energy Transfer’s Kelcy Warren Responds

On Sunday, Kelcy Warren, the chairman of ETE’s (ticker: ETE) general partner, in response to Friday night’s announcement by the Williams Companies, Inc. (NYSE: WMB) issued a press release:

“ETE is disappointed that Williams, rather than seriously engaging in discussions regarding the existing transaction, has chosen to file a third separate lawsuit in the last six weeks regarding our pending merger. The filing of these lawsuits has contributed materially to the very delay in completing the Securities and Exchange Commission’s (“SEC”) review of the proxy statement/prospectus and proceeding towards a stockholder meeting that Williams complains about in its most recent suit.

“Before this suit was filed, we were making progress towards clearing all SEC comments and believe we were close to finalizing the proxy statement/prospectus for the Williams stockholder meeting to vote on the merger. We further believe that ETE’s good faith efforts were reinforced by our recent agreement with Williams to amend the merger agreement to provide for a reduction of the time periods necessary for certain administrative matters. This amendment essentially provided nearly an additional month for the parties to finalize and mail the proxy statement/prospectus than was contemplated in the original merger agreement.

“As we have previously informed Williams and as described in the Form S-4, we believe that even if the Williams stockholders approve the merger, the merger will still not be able to close due to a failure of a material closing condition given the substantial risk that Latham & Watkins LLP will not be able to deliver the 721(a) opinion. Accordingly, we believe Williams’ latest lawsuit is an attempt to gain undue leverage in and undermine future discussions regarding the pending merger and will only result in further delay. We have made multiple attempts to engage with Williams in a constructive dialog regarding a path forward that would be in the best interest of both companies and their respective equity holders. Before this most recent suit was filed, we reached out to Williams requesting such discussions. Williams has unfortunately taken steps to limit our communications with members of its Board, and did not respond to our most recent request before filing its third lawsuit.”

ETE is a master limited partnership that owns the general partner and 100% of the incentive distribution rights (IDRs) of Energy Transfer Partners, L.P. (NYSE: ETP) and Sunoco LP (NYSE: SUN). ETE also owns approximately 2.6 million ETP common units and approximately 81.0 million ETP Class H Units, which track 90% of the underlying economics of the general partner interest and IDRs of Sunoco Logistics Partners L.P. (NYSE: SXL). On a consolidated basis, ETE’s family of companies owns and operates approximately 71,000 miles of natural gas, natural gas liquids, refined products, and crude oil pipelines.

Williams owns approximately 60 percent of Williams Partners L.P. (NYSE: WPZ), including all of the 2 percent general-partner interest. Williams Partners is a master limited partnership with major positions in top U.S. supply basins and also in Canada. Williams Partners owns and operates more than 33,000 miles of pipelines system wide – including the nation’s largest volume and fastest growing pipeline.

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