Williams, ETE spar over taxes as merger trial opens

Mon Jun 20, 2016 7:59pm EDT
 
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By Tom Hals

GEORGETOWN, Del. (Reuters) - Williams Cos Inc (WMB.N: Quote) and Energy Transfer Equity LP (ETE.N: Quote) sparred in court on Monday over a tax dispute that threatens to scuttle their $20 billion merger just one week before Williams shareholders vote on the deal to create one of the world’s largest pipeline companies.

The two companies are suing each other as Energy Transfer Equity, or ETE, looks for a way to back out of the deal amid falling energy prices and a volatile financial market. The deal was agreed upon last September and originally valued at around $33 billion.

Williams is asking a judge to force ETE to complete the takeover, alleging that the company and its chief executive, Dallas billionaire Kelcy Warren, have purposely worked to scrap the merger.

ETE has countersued, arguing that Williams has breached the agreement, in part by misrepresenting the level of its board's support for the deal.

The two-day trial kicked off in Delaware's Court of Chancery before Vice Chancellor Sam Glasscock on Monday.

Much of the day's testimony centered on the apparent discovery in March by the head of tax at ETE that the deal structure would trigger a big potential tax, something that had gone unnoticed previously.

Williams' legal team tried to show the tax issue was concocted by ETE as a last-ditch effort to back out of a deal that otherwise was relatively air-tight.

The company’s attorneys showed a video of testimony from Jamie Welch, Energy Transfer’s former chief financial officer, who was fired in February. Welch said Warren had raised concerns about the deal as early as January, saying it could trigger credit downgrades and an “implosion” of the company.   Continued...