Energy Transfer Says CEO of Williams Secretly Undermined Takeover

(Bloomberg) -- Energy Transfer LP claims Williams Cos.’s chief executive officer covertly undermined one of the pipeline industry’s biggest-ever takeovers and then sought to cover his tracks as the $33 billion deal imploded.

Williams CEO Alan Armstrong used a personal email account and private meetings to help a former employee mount a legal challenge to a merger publicly supported by Williams’ board, Energy Transfer said in a Delaware Court of Chancery filing. Armstrong’s efforts amounted to “overt steps to scuttle the merger,” according to the filing.

A Williams representative called the allegations “unfounded” and said they represent an attempt by Energy Transfer “to avoid the consequences of its own conduct.” Williams believes it’s “entitled to judgment in its favor,” according to an emailed statement.

Energy Transfer and Williams have been sparring over a $1.5 billion breakup fee since June 2016, when a combination that would have created the nation’s largest natural gas transporter fell through in one of the industry’s most notorious failures. Williams argued Energy Transfer was unfairly trying to exact the breakup fee after abandoning the deal.

This latest argument by Energy Transfer seeks to convince a Delaware judge that Williams was in breach of the merger agreement, and that that absolves Energy Transfer from having to pay anything.

Crippled Deal

John Bumgarner, the former Williams senior vice president and a shareholder at the time of the proposed merger, said Armstrong had nothing to do with the class-action lawsuit he filed in January 2016.

“I filed that lawsuit all by myself,” Bumgarner said by telephone on Thursday from Tulsa, Oklahoma.

Williams argued that Energy Transfer, a creation of billionaire Kelcy Warren, invoked a tax flaw as a cover for having buyer’s remorse as oil plunged. But the court sided with Energy Transfer, saying that while its finding of a tax flaw raised questions, it did in fact cripple the deal.

Now, Energy Transfer is arguing that Armstrong had been working behind the scenes with Bumgarner to inform his lawsuit and conduct a “PR campaign” against the merger. Energy Transfer said those communications showed that Williams was the one that wanted out of the deal.

Beginning in December 2015, Armstrong and Bumgarner exchanged “numerous emails,” the filing said, “often using Armstrong’s personal Gmail account or a Cox Communications account that he shared with his wife.” Those communications weren’t disclosed in subsequent legal proceedings and Armstrong later deleted the Gmail account, Energy Transfer alleged.

Non-Public Info

Energy Transfer said the emails centered around non-public details of the merger that later appeared in Bumgarner’s lawsuit seeking to cancel the deal. In the interview, Bumgarner said Armstrong was only trying to get him to leave Williams out of the lawsuit, arguing that the language Bumgarner was contesting was written by Energy Transfer and not Williams.

When the merger was officially terminated, Armstrong and Bumgarner met for happy hour, according to the filing. “Bumgarner followed up with an email to Armstrong two days later, referring to their ‘team’ efforts during the past 6 months,” Energy Transfer said.

“I don’t know what we were talking about,” Bumgarner said during the interview. “We worked together at the same company for a long time. I see him socially at the country club. I see him at United Way events. Tulsa is not a very big town.”

--With assistance from Jef Feeley.

To contact the reporter on this story: Rachel Adams-Heard in Houston at radamsheard@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Joe Carroll, Steven Frank

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