(Reuters) — Spectra Energy Corp (SE.N), an oil and natural gas pipeline company, is bidding for the whole of Williams Companies Inc (WMB.N), even though its market capitalization is about half that of Williams, people familiar with the matter said.
Tulsa, Oklahoma-based Williams decided to put itself on the auction block after it rejected an all-stock acquisition proposal from rival Energy Transfer Equity LP (ETE.N) in June. At the time the bid was worth $53.1 billion including the assumption of debt; it was contingent upon Williams’ canceling its plans to acquire the portion of its pipeline subsidiary Williams Partners LP (WPZ.N) that it does not already own for $14 billion.
Houston-based Kinder Morgan Inc (KMI.N) is also interested in Williams, but would face potential antitrust issues if it proceeded with a bid, the people added.
Williams collected an initial round from prospective bidders in late July according to the people.
Final bids for Williams are due the last week of August, the people said, asking not to be named because the discussions were private.
Energy Transfer has tied up at least eight investment banks that are now working on its bid, the people said, narrowing the financing options for rivals looking to compete for Williams, which has a market capitalization of around $38.5 billion.
Wells Fargo is advising Houston-based Spectra, the people said.
Spectra, Williams and Wells Fargo declined to comment. ETE and Kinder Morgan were not immediately available to comment.
Deals in the energy sector, especially oil and gas pipeline and processing companies, are turning to a more traditional corporate structure as advantages associated with a master limited partnership (MLP) wane over time.
Energy Transfer would be the latest MLP to propose using a C-corporation as a way to maximize tax advantages, increase cash flows and broaden institutional interest.
The sector had previously embraced the MLP structure because the tax burden is passed through to investors who receive fat yields. Because the partnership pays no taxes, it has a lower cost of capital.