The shares of Williams Partners LP, the owner, developer, and operator of natural gas, natural gas liquids (NGL) and oil gathering systems surged following its acquisition deal with Williams Companies, an energy infrastructure company.
The stock price of Williams Partners increased more than 21% to $57.49 per share. Williams Companies climbed almost 5% to $52.53 per share at the time of this writing, around 11:17 A.M. in New York.
Williams Partners transaction details
Williams Companies agreed to acquire all of the outstanding common units of Williams Partners for $13.8 billion in an all stock-for-unit transaction. Under the terms of the transaction, Williams Partners’ stockholders will receive 1.115 shares of Williams Companies for every unit they own.
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The acquisition price represents a 14.5% premium to the 10-day average closing price of Williams Partners as of May 12, and a 12.6% premium to its 20-day average closing price. The companies expect to close the transaction in the third quarter of this year.
Williams Partners and Williams Companies expect the combined company to become one of the largest and fastest high-dividend-paying C-Corps in the energy sector. It is expected to achieve an industry leading annual dividend growth rate of 10% to 15% until 2020.
The combined company is expected to generate adjusted EBITDA of around $5.4 billion in 2016 and pay a dividend of $0.64 per share in the third quarter of $2.56 per share on an annual basis. Next year, it is expected to pay the total dividend of $2.85 per share, a 20% increase from the previous guidance of Williams Companies. The expected quarterly dividend increases are still subject to the approval of the board of directors of the company.
The Williams Partners Conflicts Committee recommended the approval of the transaction to the company’s board of directors. The board of directors of Williams Partners and Williams Companies approved the deal.
“This strategic transaction will provide immediate benefits to Williams and Williams Partners investors. We continue to see an expanding portfolio of projects to connect the best supplies of natural gas and natural gas products to the best markets. The lower cost of capital and improved tax benefits expected from this transaction increase our confidence in extending the duration of our expected 10 percent to 15 percent dividend growth rate through 2020,” said Alan Armstrong, president and CEO of Willims Companies.
He added that the acquisition would simplify Williams Companies’ corporate structure and corporate governance. It would also position the company for strong investment-grade credit ratings.