A Delaware chancery judge Wednesday ordered Dallas-based Energy Transfer to pay Tulsa-based The Williams Companies a $410 million breakup fee for the megamerger between the two companies that Energy Transfer called off in 2016 after market conditions in the energy industry became abysmal.
The decision, by Vice Chancellor Sam Glascock III, followed a six-day trial between the parties in May, the second in a two-part series. The first trial, in the summer of 2016, resulted in Glasscock approving the breakup because Energy Transfer’s tax lawyers at Latham & Watkins were unable to deliver an opinion that was a condition precedent to the deal closing.
But in Wednesday’s new 97-page opinion, Glasscock said Energy Transfer, previously known as Energy Transfer Equity, is legally obligated to pay the breakup fee it had hoped to avoid because he found Energy Transfer’s arguments and evidence at trial “unconvincing” and because ETE breached operating covenants laid out in the merger when it issued a preferred offering that favored Energy Transfer founder Kelcy Warren and other Energy Transfer insiders. He also rejected Energy Transfer’s affirmative defenses and counterclaims.
“In denying specific performance, I noted ETE’s strong desire not to close, but also that ‘even a desperate man can be an honest winner of the lottery,’ analogizing such luck to the tax-representation-out that had presented itself,” Glasscock wrote of the core issue in the 2016 trial. “In this action for liquidated damages, however, I also note that even this lucky winner must face the tax man. Having called a dirge for the merger, ETE must pay the piper.”
Lawyers for both sides did not immediately respond to requests for comment.
Energy Transfer’s lawyers are Michael Holmes, John Wander, Craig Zieminski and Andy Jackson of the firm’s Dallas office, as well as Rolin Bissell, James Yoch and Alberto Chavez of Young Conaway Stargatt & Taylor.
Williams’ lawyers are Antony Ryan, Kevin Orsini and Michael Addis of Cravath, Swaine & Moore as well as Ken Nachbar, Susan Waesco, Matthew Clark and Zi-Xiang Shen of Morris, Nichols, Arsht & Tunnell.
The Texas Lawbook tuned into every day of the six-day trial in May. For previous, in-depth coverage, check out the below links: