UPDATE 1-Williams Partners to buy Williams Co's Canadian gas assets for $1.2 bln

Wed Feb 26, 2014 6:15pm EST
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Feb 26 (Reuters) - Pipeline company Williams Partners LP said it would buy certain Canadian gas assets from Williams Cos Inc for about $1.2 billion to boost its natural gas liquid treating and processing business.

The deal will include the purchase of about 260 miles of pipelines, an oil sand offgas processing plant near Fort McMurray, Alberta and two facilities at Redwater, Alberta.

Williams Cos owns about 64 percent of Williams Partners, while Williams Partners owns most of Williams Cos' interstate gas pipeline and domestic midstream assets.

Williams Partners said the deal will immediately add to its earnings and is expected to contribute to its distributable cash flow.

The company said it will fund the acquisition with $25 million in cash and will issue 25.6 million pay-in-kind (PIK) limited partner-units to Williams Cos, all of which can be converted to common units after February 2016.

To fund the expansion of the Redwater facility, Williams Partners said it had the option to issue up to $200 million of additional PIK units - a financial instrument that pays interest to bondholders or preferred stockholders with additional debt or equity, instead of cash.

The expansion will provide additional fractionation business to Williams Partners related to the development of offgas processing at the CNRL Horizon upgrader facility retained by Williams Cos.

Williams Cos in December was the target of two hedge funds which said the U.S. energy company had made recent operational and financial missteps.   Continued...