Williams To Acquire Control Of Access Midstream For About $6 Bln

(RTTNews) - Pipeline operator Williams Companies Inc. (WMB) said Sunday that it has agreed to acquire control of Access Midstream Partners L.P. (ACMP) for $5.995 billion in cash. The deal will enable Williams to boost its presence in areas with major shale gas formations.

Williams has proposed to merge its master limited partnership, William Partners L.P. (WPZ), into Access Midstream Partners. The company noted that the merger, if consummated, will create an "industry-leading" master limited partnership with expected 2015 adjusted EBITDA of about $5 billion, and 10 to 12 percent annual limited partnership distribution growth rate through 2017.

Further, the company said it plans to accelerate its transition to a pure-play general-partner holding company structure through the dropdown of its remaining NGL & Petchem Services assets as well as projects to Williams Partners or its then-merged successor in late 2014 or early 2015. Williams expects to have invested about $600 million in the drop-down assets by year-end 2014.

Access Midstream's business growth is driven by expected production increases in its portfolio of more than 8.3 million acres under dedication in major shale and unconventional producing areas, including the Marcellus, Utica, Eagle Ford, Haynesville, Barnett, Mid-continent and Niobrara.

Access Midstream, with a market capitalization of more than $12 billion, provides oil and natural gas gathering services to major exploration companies, including Chesapeake Energy Corp. (CHK) and Anadarko Petroleum Corp. (APC).

In December 2012, Williams had acquired a 50 percent stake in the general partner as well as 23 percent limited partner interest in Oklahoma-based Access Midstream Partners.

Under today's deal, Williams will acquire the remaining 50 percent stake in the general partner and 55.1 million limited partner units in Access Midstream Partners, held by Global Infrastructure Partners II or GIP, for $5.995 billion. At the close of trading on Friday, June 13, the 55.1 million LP units had a market value of $3.6 billion.

Upon closing of the deal, Williams will own 100 percent of the general partner and 50 percent of the limited partner interests in Access Midstream Partners.

Williams has proposed the merger in a unit-for-unit exchange at a ratio of 0.85 Access Midstream Partners units per Williams Partners unit. The proposal includes an option for Williams Partners unitholders to take either a one-time special payment of $0.81 per unit, or an equivalent value of additional common units of Access Midstream Partners, to compensate for a lower expected per-unit LP cash distribution in 2015.

Williams expects the transaction to close in the third quarter of 2014. Following the closing of the acquisition, the company plans to increase its third-quarter 2014 dividend by 32 percent to $0.56 per share, or $2.24 per share on an annualized basis.

In addition, Williams projects dividend-growth of about 15 percent annually through 2017, with planned dividends of about $1.96 in 2014, $2.46 in 2015, $2.82 in 2016, and $3.25 in 2017.

The acquisition of Access Midstream's general partner will entitle Williams to an increasing share of cash flow and also enable it to collect dividends on the partnership's common units. Williams expects the acquisition of the additional stake in Access Midstream to increase its cash flow per share and also its fee-based revenues to more than 80 percent of its gross margin.

Williams plans to fund about half of the $5.995 billion acquisition with equity and the remainder with a combination of long-term debt, revolver borrowings and cash on hand.

Further, Williams said it expects to retain its investment-grade credit ratings at two of the three ratings agencies. The company also expects Williams Partners to retain its current BBB investment-grade credit ratings.

Meanwhile, Williams Partners lowered its financial guidance for fiscal 2014, while maintaining its outlook for 2015 and 2016. The 2014 change is primarily the result of delays in the Geismar plant's expected in-service date and increased construction spending.

WMB closed Friday's trading at $47.18, up $0.33 or 0.70 percent on a volume of 1.98 million shares. ACMP closed trading at $65.36, up $1.47 or 2.30 percent on a volume of 401,518 shares.