Analysts: Williams Companies Inc Unlikely to Get Another Offer from EPD
Current Price Too High to Justify: Analyst
Williams Companies Inc (NYSE:WMB) has reportedly rejected a buyout offer from Enterprise Products Partners L.P. (NYSE:EPD). While reports suggest that Enterprise could make another offer, analysts are not so sure that this will happen.
In a note to investors on Thursday, Citigroup Inc. analyst Faisel Khan said that if the stock prices of Williams Companies and its sister company Williams Partners LP (NYSE:WPZ) were much lower, a deal would have made sense. However, at today’s prices, it’s unlikely that Enterprise Product Partners will make another attempt. (Source: “Williams Merger with Enterprise Products Looks Unlikely,” Barron’s, August 19, 2016.)
“A deal with EPD could make sense given the potential financial and cost synergies. The deal appears to be break-even at today’s stock/unit prices with no premium,” he wrote. “Therefore, a premium would completely depend on the size of the synergies.”
The analyst calculated that to justify a standard 35% premium for Williams Companies, the merged company would have to find synergies with net present value of more than $7.0 billion. He said that they “do not think it is possible.”
Khan has “neutral” ratings on both Williams Companies and Williams Partners.
Khan is not alone on this view. Jeff Birnbaum, analyst at Wunderlich Securities, also believes that a merger between the companies is unlikely to happen.
“We would think it’s unlikely WMB is eager to sell quickly after its recent disastrous foray, and board members most eager to sell are gone,” he said. “WMB is up 40% since July 4, potentially dampening EPD interest.” (Source: Ibid.)
Note that this is not the first time a potential merger deal has gone south at Williams Companies. In June, Energy Transfer Equity LP (NYSE:ETE) announced that it was terminating the merger agreement with Williams. That agreement, which was announced last September, was valued at nearly $33.0 billion. (Source: “Energy Transfer Equity calls off Williams Companies merger,” MarketWatch, June 29, 2016.)
Dear Reader: There is no magic formula to getting rich. Success in investment vehicles with the best prospects for price appreciation can only be achieved through proper and rigorous research and analysis. We are 100% independent in that we are not affiliated with any bank or brokerage house. Information contained herein, while believed to be correct, is not guaranteed as accurate. Warning: Investing often involves high risks and you can lose a lot of money. Please do not invest with money you cannot afford to lose. The opinions in this content are just that, opinions of the authors. We are a publishing company and the opinions, comments, stories, reports, advertisements and articles we publish are for informational and educational purposes only; nothing herein should be considered personalized investment advice. Before you make any investment, check with your investment professional (advisor). We urge our readers to review the financial statements and prospectus of any company they are interested in. We are not responsible for any damages or losses arising from the use of any information herein. Past performance is not a guarantee of future results. All registered trademarks are the property of their respective owners
Sign up to receive our FREE Income Investors newsletter along with our special offers and get our FREE report:
5 Dividend Stocks to Own Forever
This is an entirely free service. No credit card required. You can opt-out at anytime.
We hate spam as much as you do.