Williams Wants to Buy Pipeline Operator Blue Racer, Lawyer Says
Williams Wants to Buy Pipeline Operator Blue Racer, Lawyer Says
(Bloomberg) -- A lawyer for Blue Racer Midstream LLC, a private equity-backed natural gas pipeline owner, is accusing Williams Cos. of suing over the company’s plans to go public because it wants to buy the rest of the system for itself.
The comments came during a hearing Monday in which Blue Racer and private equity firm EnCap Investments LP asked a Delaware court to preserve plans for an initial public offering despite a lawsuit from Williams that seeks to alter the terms.
“Blue Racer sits right among two assets that Williams has control over,” Michael Holmes, an attorney at Vinson & Elkins who argued on behalf of EnCap and Blue Racer, told Delaware’s Court of Chancery. Williams is pushing back against the IPO because it wants to acquire the rest of Blue Racer it doesn’t already own and integrate it into its own pipeline system, Holmes said.
Dallas-based Blue Racer is a joint venture between private equity firm First Reserve and Caiman Energy II, of which Williams is a partner alongside Oaktree Capital Management LP and EnCap Flatrock Midstream. Williams owns about 29% of Blue Racer.
When asked whether Williams wants to buy Blue Racer, a representative for Williams said the company doesn’t comment on pending litigation.
A lawyer representing Williams said the IPO plans envisioned by EnCap would “strip Williams of rights it currently has.” The private equity firm “cannot take the transactions they want to take without our consent,” said Andrew Ditchfield of Davis Polk & Wardwell LLP.
Williams acquired its stake in Blue Racer, which operates a pipeline network in southeastern Ohio and West Virginia, as part of a larger purchase of assets in 2012. Williams negotiated with other shareholders to restrict Blue Racer from operating outside of certain geographic areas to prevent competition with Williams’ other businesses, according to Williams’ court filings.
Blue Racer is considering an IPO that could be valued at $2.5 billion, people familiar with the matter said last month.
Williams Chief Executive Officer Alan Armstrong has told the court that he supports Blue Racer’s plans for an IPO but that proposed changes to the pipeline operator’s bylaws could conflict with his company’s other interests.
To contact the reporters on this story: Rachel Adams-Heard in Houston at radamsheard@bloomberg.net;Leslie Pappas in Washington at lpappas5@bloomberg.net
To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Carlos Caminada
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