NEW YORK, Sept. 12, 2016 /PRNewswire/ -- Corvex
Management L.P. today issued the following letter to the newly
added directors of The Williams Companies (NYSE:WMB) Mr.
Stephen W. Bergstrom, Mr.
Scott D. Sheffield and Mr.
William H. Spence:
Dear Messrs. Bergstrom, Sheffield and Spence:
I want to thank you for agreeing to serve on the Board of The
Williams Companies, Inc. ("WMB"). I believe that you all have the
experience and reputations commensurate with those of directors
serving on the board of a $50 billion
plus total enterprise value company.
I am writing today because I believe that you are in a unique
position to influence the course of WMB as it relates to business
operations, management and, of course, to the recent proposal from
Enterprise Products Partners LP ("EPD") and other proposals that
may arise. Corvex Management LP ("Corvex"), where I serve as the
Managing Partner, and its advised funds, have long been among the
largest stockholders of WMB. We have confidence in you to do
the right thing and all WMB stockholders are relying on you to do
so. I wanted to take this opportunity to share my thoughts
regarding the current state of affairs of the company and its
board.
This is much more than a question about a single proposed
transaction; it is a question about the fundamental governance of
the company and the ability of each director of WMB to fulfill
their obligations to all stockholders. With the Board
currently saddled with six directors and a CEO who I believe have
not always prioritized the best interests of stockholders, you are
now in a position to change the future of WMB.
In Thursday's press release EPD stated that:
"As a result of rumors with respect to our proposals, as well as
the lack of engagement by Williams, we have determined that there
is no actionable path forward toward an agreement. We, therefore,
have withdrawn our non-binding proposals. While we are
disappointed, we will maintain our financial discipline as we
pursue future growth opportunities for the partnership."
Although in its responsive press release WMB stated that it was
"surprised" by the Enterprise announcement, it certainly did not
surprise Corvex. This exchange of press statements is striking
evidence of the inadequacy of the legacy WMB board to represent
stockholders, confirming our belief that the legacy Board of WMB
would not engage with EPD. The statement by EPD that WMB failed to
engage with EPD, thereby causing EPD to perceive "no actionable
path forward", makes it crystal clear to me both that the current
board is not functioning properly and that it is imperative to
quickly populate the board with a majority of qualified,
independent directors. With EPD at our doorstep, getting the
board "right" at WMB should not be left hanging in the wind until
late November.
That said, given the current composition of the Board, at this
critical time for WMB the responsibility for guiding our company
rests on the three of you.
Williams is a company with tremendous assets that has a long
history of underperforming its true potential. Further,
Williams is at a critical point in its corporate life, having just
seen six highly qualified directors resign, cut its dividend a
massive 70%, and received a takeover approach from the largest and
one of the most highly regarded players in the midstream
infrastructure space.
I think you will soon find that you are burdened with legacy
directors who, in my view, are both unable and unwilling to have a
point of view differing from the CEO and are therefore opposed to
change. I am concerned that you have been put into a position
of being used as cover for the failures of the legacy Board without
actively managing the process. You have an outsized influence
on the Board that can be used to help create good governance and
board responsiveness. What Williams needs is a fresh set of
independent, knowledgeable, business leaders to evaluate the
overall situation and help guide this company. You are in a
position to insist that happens.
Having followed Williams for several years, including serving as
a director for 18 months, I believe I have a unique understanding
of how things work at the company and thus I urge you to consider
taking the following actions:
1. Form a strategic review
committee consisting of the three of you to analyze the merits of a
strategic combination with EPD and other players in the space, and
take a sober look at the stand-alone potential of the
business. The committee should hire a world class financial
advisor to assist it. I would suggest Barclays or Lazard – who have
deep knowledge of the company and the competitive landscape, having
advised WMB intensively over the last few years. You are
going to have to get up to speed fast, making the advice and recent
experiences of these firms critical.
2. Get informed,
independently of management, of the history of the company, its
future prospects, and the merits of various strategic
alternatives. Specifically:
a. Meet with the six
directors that recently resigned – Frank
MacInnis, Ralph Izzo,
Laura Sugg, Steve Nance, Eric
Mandelblatt, and myself – to learn about their experiences
on the WMB Board and insights into the governance of the
company.
b. Meet with your stockholders and
hear their views, including their thoughts on standalone versus
strategic alternatives – just as Frank
MacInnis and Laura Sugg did
when they were evaluating the ETE transaction.
c. Meet with the company's
historic advisors: Gary Posternack
at Barclays, Al Garner at Lazard,
and Cravath.
d. Speak individually with senior
management.
Having been an investor in the midstream space for many years, I
will take this opportunity to share the following thoughts. The
midstream energy space is rapidly consolidating – just last week
Enbridge combined with Spectra in a $130
bn transaction that notably saw both stocks rise throughout
the week. Cost of capital is critical in the midstream
business and scale goes hand in hand with cost of capital.
While I remain open minded to all strategic alternatives that WMB
might pursue (including remaining independent if, after thorough
consideration, that is the path that delivers the most value),
consider the size, scale, and access to capital that would come
with an EPD merger: the pro forma company would be the
3rd largest energy company in North America with an enterprise value in
excess of $130 bn and consolidated
EBITDA of greater than $10
bn.
While I have not prejudged the merits of an EPD deal – and
neither should the Board – I cannot help but observe the following
potential advantages of the transaction:
1. On a standalone basis,
WMB is levered 6.0x and has cut its dividend to $0.80 per share. Pro forma for a
combination with EPD (assuming reasonable assumptions and
synergies) the combined company would be less than 4.5x levered,
could pay a $2.30 per share dividend
and still maintain a distribution coverage ratio of 1.2x. At
EPD's current yield (5.9%) this would deliver a stock price of
$39 per share or a 50% premium to our
unaffected price of $26 per
share[1].
2. Williams (and EPD)
stockholders would be able to participate in both cost and revenue
synergies which I believe could be substantial.
3. Due to an over-leveraged
balance sheet, WMB is currently retaining earnings to fund its
growth program. Conversely, EPD has significant access to
both debt and equity markets on attractive terms. EPD 10 year
credit spreads are less than half of WMB's, making the value of
WMB's future growth projects much higher inside the pro forma
company.
I do not believe that the value of a combination with EPD (or
any other strategic competitor) is about headline price or the
relative trading multiples of the two companies. Rather, in
my opinion, the key is to determine whether the combined company
will deliver more value than the standalone alternative. A
'has-gets" analysis that compares the cash flows received to WMB
stockholder through ownership of approximately 30% of pro forma
versus 100% of standalone WMB is the appropriate way to compare
value.
Let me be clear, my proxy contest is not a mandate to sell the
company. It is about a fundamental governance question:
shouldn't a company with world class potential such as Williams
have world class directors? The recent developments with EPD
– specifically a reported lack of engagement - only highlight the
importance and gravity of having world class directors on this
board. There remains a huge opportunity to create value at
Williams.
I believe that we have a common goal - maximizing stockholder
value. I hope that you will consider my suggestions above. I
believe they are essential components to achieve that goal.
Again, I realize that this is likely more work than what is asked
of the typical director but this is a unique situation and the
opportunity to create shareholder value is substantial. Thank
you very much for your time and effort. I look forward to
speaking with you in the near future.
Sincerely,
Corvex Management LP
Keith Meister, Managing Partner
About Corvex Management, LP
Corvex Management, LP is an investment firm headquartered in
New York, New York that engages in
value‐based investing across the capital structure in situations
with identifiable catalysts. Corvex was founded in March 2011 and follows an opportunistic approach
to investing with a specific focus on equity investments, special
situations and distressed securities largely in North America.
CONTACT:
Kekst
Jeremy Fielding
(212) 521-4800
IMPORTANT INFORMATION:
In connection with their intended proxy solicitation, Corvex
Management LP and/or certain of its affiliates intend to file a
proxy statement with the Securities and Exchange Commission to
solicit stockholders of Williams.
SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT AND
OTHER DOCUMENTS RELATED TO THE SOLICITATION OF PROXIES BY CORVEX
AND/OR ITS AFFILIATES FROM THE STOCKHOLDERS OF THE WILLIAMS
COMPANIES, INC. FOR USE AT ITS 2016 ANNUAL MEETING OF STOCKHOLDERS
WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION, INCLUDING INFORMATION RELATING TO THE PARTICIPANTS IN
SUCH PROXY SOLICITATION. WHEN COMPLETED, A DEFINITIVE PROXY
STATEMENT AND A FORM OF PROXY WILL BE MAILED TO STOCKHOLDERS OF THE
WILLIAMS COMPANIES, INC. AND WILL ALSO BE AVAILABLE AT NO CHARGE AT
THE SEC'S WEBSITE AT HTTP://WWW.SEC.GOV.
In accordance with Rule 14a-12(a)(1)(i) under the Securities
Exchange Act of 1934, as amended, the following persons are
anticipated to be, or may be deemed to be, participants in any such
proxy solicitation: Corvex Management LP, Keith Meister, Corvex Master Fund LP, Corvex GP
LP, and the nominees for election as directors of the Issuer (the
"Corvex Nominees"), who, in addition to Keith Meister, include: Matthew Ailey, James H.
Gemmel, Michael Goldberg,
Malcolm Levine, Keith Nunziata, Rizwan
Sabar, Keith Schaitkin,
Benjamin Silver and Eric VandeVorde. Certain of these persons hold
direct or indirect interests in securities of the Issuer as
follows: Corvex Management LP and Keith
Meister beneficially own 23,177,357 shares of common stock
of the Issuer; Corvex Master Fund, LP is the record or street name
holder of 14,458,547 shares of common stock of the Issuer;
James H. Gemmel is the beneficial or
street name owner of 633 shares of common stock of the Issuer; each
of the Corvex Nominees has an interest in being nominated and
elected as a director of the Issuer but no Corvex Nominee other
than Keith Meister and James H. Gemmel beneficially owns any shares of
common stock of the Issuer.
[1] Based on WMB closing price before Reuters and FT
articles
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SOURCE Corvex Management L.P.