July 22, 2024

DealBook: Energy Transfer Raises Southern Union Bid to $5.1 Billion

Panhandle Energy, a division of Southern Union, operates a liquid natural gas terminal in Lake Charles, La.Panhandle Energy, via Associated PressPanhandle Energy, a division of Southern Union, operates a liquid natural gas terminal in Lake Charles, La.

5:23 p.m. | Updated

Energy Transfer Equity raised its bid for the the pipeline operator Southern Union Company to $5.1 billion in cash and stock on Tuesday, topping a rival $4.9 billion bid from the Williams Companies.

Still, the battle may not be done. Shares of Southern Union rose 4.2 percent to $42.07 on Tuesday, indicating that investors expect an even higher bid. The new Energy Transfer offer is meant to address several concerns about its original bid for Southern Union, including the first offer’s complicated structure and two lucrative consulting and noncompete agreements offered to Southern Union’s two top executives.

Under the new terms of the deal, Energy Transfer will offer $40 a choice of either cash or stock. Up to 60 percent of the deal consideration is payable in cash. About 14 percent of Southern Union’s shareholders have signed onto the new offer and have chosen to take stock, potentially letting more investors choose cash.

Moreover, the two Southern Union executives who were offered the rich consulting contracts, George L. Lindemann, the chief executive, and Eric D. Herschmann, the president, have agreed to forgo them.

Energy Transfer executives acknowledged on Tuesday that Williams’ $39-a-share all-cash offer, announced only days after their initial bid, had forced them to counter with a new proposal that was simpler and higher-valued. Energy Transfer initially sought to block Southern Union from holding talks with Williams, a major energy company seeking to bolster its gas pipeline business.

Energy Transfer even decided to offer new partnership units, something it was reluctant to do.

“We’ve been more aggressive here than we have been than probably in my whole career,” Kelcy Warren, Energy Transfer’s chairman, said in a conference call with analysts Tuesday morning.

Mr. Warren argued that combining his company with Southern Union would yield a stronger pipeline operator with significant reach throughout the southern United States. Offering stock alongside cash would allow Southern Union shareholders to benefit if the combined company performs well.

“I don’t think this is a $40 offer,” he said on the call. “I think this is substantially more than $40.”

A Williams spokesman declined to comment.

Shares of Energy Transfer rose slightly on Tuesday, to $44.99, while shares of Williams dipped a little, to $30.68.

Article source: http://feeds.nytimes.com/click.phdo?i=010f70ec8b805aab4c55c3345d9a130d

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