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Chancery Court Considers Whether Either Party to Failed Multibillion Dollar Merger Was Entitled to Payment of a Fixed Termination Fee

Posted by on Wednesday, August 11, 2021 in Delaware Corporate Law Bulletins, En Banc, Volume 74.

Robert S. Reder & Maryam Saad | 74 Vand. L. Rev. En Banc 263 (2021) |

The Williams Companies, Inc. (“Williams”) and Energy Transfer L.P. (“ETE”) are “significant players in the energy pipeline business” (quoting Williams II below). On September 28, 2015, Williams and ETE agreed to a complicated “multi-billion-dollar merger” (quoting Williams II below) structured to provide “tax free” (quoting Williams I below) treatment for ETE via a merger agreement (“Merger Agreement”). Shortly thereafter, the transaction “foundered on the shoal of a declining energy market,” making the transaction “far less attractive to ETE,” who “sought a way out” (quoting Williams III below). Fortunately for ETE, the market decline also made it impossible for ETE’s tax counsel to issue an opinion confirming the “tax-free” status of the transaction for ETE (“Tax Opinion”) (quoting Williams III below). And because receipt of the Tax Opinion was a condition to ETE’s obligation to consummate the transaction (“Tax Condition”), ETE refused to close. Then, the day following passage of the Merger Agreement’s June 28, 2016, outside date for completing the transaction (“Outside Date”), ETE sent Williams a notice purporting to terminate the Merger Agreement (“Termination Notice”). 

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Robert S. Reder & Maryam Saad