Tax issue throws Energy Transfer Equity-Williams merger into doubt

The deal between U.S pipeline company Energy Transfer Equity and Williams Co is in troubled waters. ETE is uncertain on delivering the important tax opinion for it to acquire the peer pipeline firm.

The law under 721(a) of the U.S tax code said that the acquisition of ETE with Williams would be tax-free. Both companies consider it as a key provision for the said merger. But according to ETE's law firm, Latham & Watkins, they will not be able to deliver the said tax opinion right away.

As reported by Bloomberg, Selman Akyol, an equity analyst at Stifel Nicolaus & Co., views the current uncertainty over the opinion as yet another impediment to the ETE-WMB merger. Akyol added that the latest transaction just muddies the waters between the two companies.

The different positions of the companies regarding the tax issue have placed them in disagreement. Both companies, however, are talking about the effect of the issue to the planned merger. Nonetheless, Williams still allege ETE of trying to find ways to avoid the tie-up even though the terms of the deal would not permit it.

It was last year when Energy Transfer CEO Kelcy Warren set his eyes on Williams in order to expand his business and become the biggest pipeline network in the world. But the prolonged down sloping of gas prices has made the deal difficult to pull off as per Reuters.

According to KJRH, after the planned acquisition, Mayor Dewey Bartlett of Tulsa said he was stunned by the news that ETE will remove the presence of Williams Partners LP in the city. He added that the plan was contrary to ETE's original statement that it will maintain the presence of Williams in Tulsa.

The current deal with Williams, however, would force ETE to take a $6billion debt load. ETE, on the other hand, has launched controversial deals to appease its shareholders, this is one of the reasons why Williams filed charges against ETE. The latter also fired its chief financial officer to save funds from the Williams deal.

Tags

ETE, Energy Transfers Equity, Williams Co, US pipeline company, company merger, ETE-WMB merger, Kelcy Warren, tax opinion, Mayor Dewey Bartlett

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