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MONTH-IN-BRIEF (Nov 2023)

Delaware Supreme Court Affirms $600 Million Ruling against Energy Transfer in Williams Merger Fallout

By Yu-tyan Lin, LLM Candidate, Class of 2024, NYU School of Law

On October 10, 2023, in Energy Transfer, LP v. Williams Companies, Inc., 2023 WL 6561767 (Del. 2023), the Delaware Supreme Court affirmed three decisions from the Delaware Court of Chancery, compelling Energy Transfer, LP (ETE) to pay a $410 million fee, plus interest, and over $85 million in attorney’s fees, for withdrawing from a significant $38 billion merger with The Williams Companies (Williams). This decision marked the end of a legal battle from the failed merger between these two fuel pipeline companies.

In May 2015, Williams agreed to acquire units in Williams Partners LP (WPZ), with a $410 million termination fee if it terminated the WPZ transaction (WPZ termination fee). When ETE later proposed acquiring Williams that same year in an all-equity deal (Merger Agreement), it insisted on Williams’s terminating the WPZ deal. The Merger Agreement provided that if ETE terminated the transaction while in violation of its covenants under the Merger Agreement, ETE would be required to reimburse Williams for the WPZ termination fee. Furthermore, the Merger Agreement contained a provision awarding attorney’s fees to the prevailing party in any action to recover the WPZ termination fee. Finally, under the Merger Agreement, the Williams board of directors was required to pass a series of resolutions in support of the transaction; and if the Williams board decided against supporting the merger, Williams would have to pay a $1.48 billion breakup fee to ETE (Merger termination fee). The Williams board did adopt resolutions approving the Merger Agreement, subject to the company’s stockholders’ approval.

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