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Spectra Exits Auction For Williams, Energy Transfer Remains

Spectra Energy Corp. has exited the auction process for rival pipeline company the Williams Cos. Inc., raising the possibility that Energy Transfer Equity LP could succeed in buying the company, people familiar with the discussions said.

Williams put itself up for auction in June after it rejected an acquisition proposal from rival ETE. At the time, the bid was worth $53.1 billion, including the assumption of the company’s debt. It was contingent upon Williams’ canceling its plans to acquire the portion of its pipeline subsidiary Williams Partners LP that it does not already own for $14 billion.

Williams Cos. said it rejected the offer because it undervalued the company. Its stock dropped $1.30 on Sept. 11 to $42.97 on the New York Stock Exchange (NYSE).

Representatives for Williams, Spectra and ETE declined to comment, and the sources asked not to be named because they were not authorized to discuss the talks publicly.

Last weekend, Williams’ board met to weigh options, including buyout offers collected in August, people briefed on the talks said. Williams is still deciding whether to remain independent or sell itself to ETE, people familiar with the discussions said.

ETE and Tulsa, Okla.-based Williams are negotiating, the sources said, and are trying to agree over the share portion of the offer. ETE is offering new shares that have never traded in the public market and therefore Williams believes that the valuation for those shares is untested, the people said.

Analysts following the transaction said if Williams decides not to sell itself to ETE, the latter could launch a tender offer for Williams’ outstanding shares in an appeal directly to shareholders. In a July 7 press release, ETE said “ETE remains fully committed to taking the necessary steps to implement the proposed transaction with Williams.”

Many industry sources believe that statement means ETE could launch a hostile takeover if discussions fall through.

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