Energy Transfer Equity is taking steps that may enable it to renegotiate its $20 billion cash-and-stock acquisition of Williams Companies, Inc., Reuters reported late Monday evening.
The companies are seeking to reduce the number of days specified for completing some of the deal’s administrative requirements, which would give them time to engage in renegotiation of terms ahead of a June 28 deadline for the deal to close, according to the report.
Dallas billionaire Kelcy Warren, the CEO of Energy Transfer, set his sights on Williams last year to transform his empire into one of the biggest pipeline networks in the world. The initial deal was economically attractive; however, the deal hit a speed bump as a result of a prolonged drop in oil and gas prices.
Energy Transfer and Williams are in talks to reduce the number of days specified for completing some of the deal’s administrative requirements, according to sources involved with the merger.
This would give the companies time to engage in renegotiation of terms ahead of a June 28 deadline for the deal to close.
There is no certainty that such renegotiation talks will occur or prove to be successful.
The sources asked not to be identified because the deliberations are confidential. Energy Transfer and Williams declined to comment.
The latest development comes after Energy Transfer said in April its lawyers may not be able to deliver an important tax opinion for its takeover of Williams, throwing the agreed acquisition into doubt.
Since the takeover was announced in September 2015, Energy Transfer launched a controversial offering of preferred shares to its top shareholders, for which it is currently being sued by Williams. Energy Transfer has also fired its chief financial officer and slashed projections for cost savings from the Williams deal.
Energy Transfer said last March it expected the base case for earnings before interest, taxes, depreciation and amortization from commercial synergies from the deal to be about $170 million a year by 2020, compared with previous forecasts of more than $2 billion when the deal was unveiled.
The size of the deal has also shrunk to about $20 billion from an original $37.7 billion. In another sign of the deal’s troubles, Williams has yet to schedule a vote for its shareholders to approve the transaction with Energy Transfer.
Another administrative hurdle is managing how Williams shareholders will be paid for their shares once they elect to receive cash or stock.
Energy Transfer would need to take on a heavy debt load to fund the $6 billion cash portion of the deal under the existing terms. Williams said in its lawsuit last month that Energy Transfer has looked into how it might be able to walk away from the merger even though the terms do not allow either party to walk away from the merger agreement.