Williams shares pop as hedge funds pile in, ETE offer spread narrows

Wed Feb 17, 2016 2:21pm EST
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Feb 17 (Reuters) - William Cos Inc's shares continued their surge on Wednesday, having jumped by nearly a fifth this week, narrowing the spread of its takeover offer by rival pipeline company Energy Transfer Equity LP.

The current value of Energy Transfer's bid is about 15 percent higher than Williams' share price as of Tuesday's close. As recently as Friday, the spread was around 23 percent.

Williams shares jumped after fourth-quarter filings by investors showed that several hedge funds had jumped into the stock, including Jana Partners.

The spread between William's stock price and the ETE offer has been even wider in previous weeks, and was about 27 percent as recently as Feb. 8, indicating that investors expect the deal to fall through.

Williams' shareholders, disappointed by the deal's lack of a hefty premium and worried about the combined company's debt levels, gave the Energy Transfer offer a poor reception the day it was announced on Sept. 28, pushing its shares down 12 percent.

Since then, oil prices have fallen further, weakening the investment case for pipeline companies such as Williams and Energy Transfer, which need to grow cash flows to fund payouts to investors.

Energy Transfer's share price has dropped about 74 percent since the offer was announced, signaling the market's disapproval of the deal. Williams' stock has slid 64 percent.

The total value of the cash-and-stock deal had fallen to $12.94 billion, as of Tuesday close, from $33 billion in September, when the companies reached a deal ending a pursuit stretching back to January 2015.

Williams, which will take questions from Wall Street on Thursday after it reports fourth-quarter results, has said the deal will enhance its growth prospects.

Williams shares were up more than 5.2 percent to $15.78 in afternoon trading on Wednesday, while Energy Transfer shares were up about 8 percent at $6.55, on a day Brent crude jumped more than 7 percent. (Reporting by Michael Flaherty, Mike Stone and Michael Erman in New York, and Amrutha Gayathri in Bengaluru; Editing by Saumyadeb Chakrabarty)