Reckoning Near for Merger of Energy Transfer and Williams
A year ago, Kelcy L. Warren, the chief executive of the pipeline giant Energy Transfer Equity, cast a long shadow even among the Texas wildcatting elite, with a personal fortune estimated at more than $7 billion.
He is $4 billion poorer today as he scrambles to find a way out of a merger with the Williams Companies, a $38 billion deal that has become so acrimonious that an analyst has called it “the Cuban missile crisis of mergers.”
To date, Mr. Warren has nothing to show for his efforts but a significant decline in the value of the deal — now worth about $20 billion — as well as three lawsuits filed by Williams against his company and one filed by Williams against him personally. Now, time is running out.
Williams shareholders will vote on the merger in a week. On Monday, the two sides will meet in a Georgetown, Del., courtroom, where lawyers from Wall Street’s top firms will go toe-to-toe analyzing the fine print in the 400-page merger agreement.
Williams and Energy Transfer accuse each other of breaching the agreement. Everything is riding on a decision by Vice Chancellor Sam Glasscock III of the Delaware Court of Chancery.
Energy Transfer hopes the judge will find that whatever violations of the agreement may have occurred are enough to kill the deal.
If the judge rules for Williams, and Energy Transfer is held to its original offer, the only way out for Energy Transfer would be to write a large settlement check. The judge is expected to rule before the Williams shareholder vote.
Energy Transfer Sees a Way Out of Its Williams Pipeline Deal MAY 5, 2016
A slim chance remains that the sides will reach a settlement before the trial. Mr. Warren, 60, who declined to comment for this article, is not expected to testify.
“You’re in the middle of what I call a typical Texas Hold ’em,” said David J. Mahmood, the founder of Allegiance Capital Corporation, an investment bank based in Dallas. “It’s a high-stakes poker game that’s like a shootout, and it’s tough to forecast who’s going to win or lose.”
It would be easy to cast the troubles of the merger of Energy Transfer and Williams as yet another result of the collapse in energy prices that has sent many companies into bankruptcy court.
But from its early days, the deal was also driven by hubris, the ambition of an empire builder who coveted his prize so much he left little or no room for anyone — including himself — to wiggle free.
That is not to say Mr. Warren is not trying, fearing that the combination could, at this point, badly damage the empire he so carefully built.
“We can’t close this transaction,” he told Wall Street analysts in a conference call in May. “Absent a substantial restructuring of this transaction — which Energy Transfer has been very willing, and actually desiring, to do — absent that, we don’t have a deal.”
Few benefited quite as much from the shale boom of the last decade as Mr. Warren. As his wealth grew, so did his profile in Dallas and beyond.
Mr. Warren, a big Republican contributor, and his third wife, Amy, a former flight attendant who was an executive assistant at Energy Transfer, were named last year to Texas state boards by Gov. Greg Abbott. He donated millions of dollars to rename a Dallas park after his only child.
And like any self-respecting billionaire, Mr. Warren bought property. In 2009, he spent $30 million on a 23,000-square-foot mansion in Dallas complete with a bowling alley, a baseball diamond and an indoor swimming pool. That is the small home.
Exotic game roam free on his 8,000-acre ranch near Cherokee, Tex. In 2010, Mr. Warren paid $46.5 million for the 3,500-acre BootJack Ranch in southwest Colorado. He also owns an island off Honduras.
His lifestyle is a far cry from that of his youth, in the small town of White Oak, Tex., about 120 miles east of Dallas. The son of an oil-field worker, Mr. Warren played football in high school and was the 1974 state pole vault champion. (He soared over 12 feet, 6 inches.)