Williams and Williams Partners have announced they have agreed to sell the companies’ Canadian businesses to Inter Pipeline for combined cash proceeds of CAD$1.35 billion.
In connection with the sale, Williams agreed to waive US$150 million of incentive distribution rights in the quarter following closing to facilitate the Partnership’s consent to the sale in recognition of the value of inter-company contracts. After taking into account this waiver, Williams Partners will receive net consideration of US$817 million and Williams will receive net consideration of US$209 million.
At closing, in compliance with certain tax rules pertaining to a sale of Canadian assets by a foreign parent, 25 percent of the proceeds will be deposited with the Canadian Revenue Authority (CRA) or an escrow agent pending receipt of CRA tax clearance which is expected in late 2016 or early 2017. The companies do not expect a taxable gain in light of the substantial tax basis in the assets. Williams and Williams Partners plan to use the cash proceeds from the transaction to reduce borrowings on credit facilities.
The transactions are expected to close in 2016. Closing is subject to customary closing conditions including Canadian regulatory approval.
TD Securities Inc. acted as lead financial advisor to Williams on the transactions and provided fairness opinions to the board of directors of both Williams and Williams Partners that the consideration to be received under the transaction was fair, from a financial point of view, to each company respectively. Barclays acted as a co-advisor to Williams on the transactions.
Williams’ President and Chief Executive Officer Alan Armstrong said,
“We are proud of the tremendous businesses our Canadian team has built since we first began operating in Canada in 2002. This transaction represents significant progress on a major component of the 2016 capital and financing plan we announced in January.”