UPDATE 1-Williams shares rise as hedge funds pile in, ETE offer spread narrows

Wed Feb 17, 2016 6:10pm EST
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(Adds fourth-quarter results and Chesapeake relationship details, updates stock prices)

By Michael Flaherty and Mike Stone

NEW YORK/HOUSTON Feb 17 (Reuters) - William Cos Inc's shares extended their surge on Wednesday, having jumped by nearly a fifth this week, narrowing the spread of the 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 about 23 percent.

Williams also released its fourth-quarter results, which saw a loss of 94 cents per share, missing analyst expectations of a gain of 22 cents a share.

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 had 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.

Oil prices have since fallen further, weakening the investment case for pipeline companies such as Williams and Energy Transfer, which need to increase cash flows to fund payouts to investors.   Continued...