UPDATE 3-Williams sues ETE and CEO Warren over share offering

Wed Apr 6, 2016 5:20pm EDT
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(Adds Energy Transfer response, shareholder quote, background)

By Michael Erman and Mike Stone

April 6 (Reuters) - Williams Companies Inc sued Energy Transfer Equity LP and its Chief Executive Kelcy Warren on Wednesday, claiming they violated the U.S. pipeline companies' merger agreement by making a private preferred share offering to ETE's top investors.

Williams argued that the offering in March, which prompted a public rift between the companies, was designed to siphon money to Warren and away from Williams and ETE shareholders.

"Warren devised the special offering as a means to shield his own personal financial interests in ETE - namely, the distributions he stands to receive from ETE on his ETE common units - from the economic uncertainty that has been facing ETE in recent months," Williams said in a lawsuit filed in a Texas district court.

Another Williams lawsuit filed against ETE on Wednesday, in the Delaware Court of Chancery, remains under seal.

Williams, based in Tulsa, Oklahoma, said in a statement it was committed to the nearly $14 billion deal and hoped to hold a stockholder vote to close it as soon as possible.

The offering at the center of the lawsuit effectively protects Warren and other top shareholders from a cut in distributions by ETE, a master limited partnership.

The offering to top investors, which ETE said would help it pay down debt from the merger, would provide convertible units in exchange for a temporary cut in distributions. These investors would eventually receive equity in exchange for the convertible units even if other ETE shareholders had their distributions reduced.   Continued...