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Energy Transfer LP 8-K Report, Agreement Terminated (Jun 29, 2016)

Filed June 29, 2016For Securities:ETET-PI

Summary

This 8-K filing from Energy Transfer Equity, L.P. (ETE) on June 29, 2016, announces the termination of the previously announced Agreement and Plan of Merger with The Williams Companies, Inc. (WMB). The termination was triggered by the inability of Latham & Watkins LLP to provide a crucial tax opinion (the "721 Opinion") required for the transaction to close, a condition ETE had the right to terminate upon if unmet by the June 28, 2016, "Outside Date". This termination follows a Delaware Court of Chancery ruling that supported ETE's right to terminate under these circumstances. The merger, initially announced in September 2015, involved WMB merging with Energy Transfer Corp LP (ETC), with ETC then contributing WMB's assets and liabilities to ETE. The termination is a significant development for investors, as it effectively ends a major proposed transaction and has led to ongoing litigation, with WMB having appealed the Delaware court's decision. ETE also cited other alleged breaches by WMB in its termination notice.

Key Highlights

  • 1Energy Transfer Equity, L.P. (ETE) has terminated its Agreement and Plan of Merger with The Williams Companies, Inc. (WMB).
  • 2The termination was primarily due to the failure to obtain a required tax opinion (the "721 Opinion") from Latham & Watkins LLP by the agreed-upon deadline.
  • 3A Delaware Court of Chancery ruled in favor of ETE, affirming its right to terminate the merger agreement under the specified conditions.
  • 4The merger, announced in September 2015, was complex, involving a merger of WMB into Energy Transfer Corp LP (ETC) followed by a contribution of assets and liabilities to ETE.
  • 5Williams Companies has appealed the Delaware court's decision, indicating continued legal dispute.
  • 6ETE is asserting that Williams breached the merger agreement, which could potentially entitle ETE to a $1.48 billion termination fee if ETE prevails on certain claims.
  • 7This filing includes a press release (Exhibit 99.1) detailing the termination and referencing ongoing litigation.

Frequently Asked Questions

Energy Transfer Equity (ETE) terminated the merger agreement primarily because a required tax opinion from Latham & Watkins LLP, stating that the contribution of Williams' assets to ETE should qualify for tax-free treatment under Section 721(a) of the Internal Revenue Code, could not be obtained by the June 28, 2016, deadline. ETE had the contractual right to terminate the agreement if this condition was not met by the 'Outside Date'.

The Delaware Court of Chancery ruled in favor of ETE, confirming that ETE was contractually entitled to terminate the merger agreement with Williams if the required tax opinion was not delivered by the Outside Date. This ruling supported ETE's position in the dispute over the termination.

No, the litigation is ongoing. Williams Companies has appealed the decision of the Delaware Court of Chancery to the Delaware Supreme Court. Therefore, the ultimate outcome of the dispute is still pending.

While the primary reason for termination was the failure of a closing condition (the tax opinion), ETE is also asserting that Williams Companies breached the merger agreement. If ETE prevails on specific claims related to Williams' actions, such as modifications to its board's approval, Williams could owe ETE a termination fee of $1.48 billion. However, the current filing centers on ETE's termination based on unmet closing conditions.