Following a Delaware judge’s ruling last week that Energy Transfer Equity (ticker: ETE) could walk away from the Williams Company (ticker: WMB) merger, and Energy Transfer’s official cancellation of it, the fallout from the decision is coming full circle.
Six of Williams Company’s directors, including the company’s chairman, resigned on Thursday following a failed attempt to oust the CEO, according to sources quoted by The Wall Street Journal.
The loss of roughly half of the company’s 13 member board comes immediately on the heels of Energy Transfer Equity’s announcement this week that the company plans to walk away from the $20 billion deal initially proposed in September 2015. The planned merger had become contentious and led to litigation resulting in the dissipation of the merger agreement.
Two of the directors reported to have stepped down are Keith Meister and Eric Mandelblatt. Meister and Mandelblatt run two of the company’s largest investors: hedge funds Corvex Management and Soroban Capital Partners, respectively. Along with the other four board members, they all chose to resign after launching an attempt to oust Alan Armstrong, Williams Co.’s CEO, according to Reuters. Reports said that Armstrong still had the support of six members of the board, leaving Armstrong’s vote on his own status as the deciding ballot.
Voting among the board members when the merger was initially proposed led to an 8-5 vote in favor of the agreement, with the six now former board members voting in favor of the merger. Armstrong, who is the lone insider on the board, voted against the merger agreement, according to Wall Street Journal.
A Divisive Board
Carl Icahn protégé Corvex’s Meister and Soroban’s Mandelblatt became directors in 2014 after launching an activist campaign against Williams’ management in late 2013. According to reports, part of their activist quest was to see the merger agreement through. Board member Kathleen Cooper testified that she began to feel her position being threatened for voting against the merger. She felt the activist investors would target her if the deal was not approved. Other board members felt this sentiment was overblown as the board only discussed the possible negative effects from a vote against the deal.
The depletion in oil and gas prices since the merger agreement led to Energy Transfer believing the deal was no longer attractive at lower commodities prices. Energy Transfer claimed that cost savings would be minimal and adjustments would have to be made including cutting jobs and reducing or eliminating distributions. Williams Co. believed the change in sentiment was buyer’s remorse following the approval of the deal.
