Williams to Acquire Barrett Resources
Williams Cos. on Monday agreed to buy oil and natural gas company Barrett Resources Corp. for about $2.5 billion, trumping a hostile $2-billion bid made by Royal Dutch/Shell Group and forcing the world’s No. 2 oil company to concede defeat.
Williams, whose chief business is trading power and other energy commodities, will quickly build its natural gas reserves with the acquisition of Barrett, which has been at the center of a tense takeover battle for two months.
Barrett, based in Denver, produces natural gas and oil in the Rocky Mountain region, and its profile has risen with concerns about short supplies of natural gas. The company became even more closely watched after Royal Dutch/Shell made an unsolicited $55-a-share bid for it in March.
Barrett rejected that bid as well as a revised $60 bid from the oil giant last week. Calling the price unacceptable, Barrett said it was seeking better offers from other energy concerns through an auction.
Williams, based in Tulsa, Okla., and one of the largest natural gas pipeline companies in the United States, came out on top with the announcement Monday that Barrett had agreed to its cash-and-stock offer.
Shell said it did not plan to make another move on Barrett and was withdrawing its earlier bid.
“We have no intention of abandoning our economic discipline and pursuing an acquisition at price levels that cease to add value for our shareholders just for the sake of making a deal,” said Walter van de Vijver, chief executive of Shell Exploration & Production Co., a unit of Royal Dutch/Shell.
Williams said it would immediately begin a cash tender offer to acquire 50% of Barrett’s outstanding stock for $73 a share. Each remaining Barrett share would then be swapped for 1.767 shares of Williams. Williams also would assume about $300 million in Barrett debt.
The cash component of the deal represents an 8.5% premium on Barrett’s closing stock price of $67.30 on Friday and a 60% premium on the company’s share price the day before Shell launched its takeover move.
Shares of Williams fell $2.39, or nearly 6%, to close at $39.28, and Barrett rose $2.85 to close at $70.15, both on the New York Stock Exchange.
Keith Bailey, chairman and chief executive of Williams, defended the high price being paid for Barrett. “It will go down as one of the best acquisitions that Williams has been able to engage in,” he said.
If the deal is approved by antitrust regulators and wins over shareholders, it could close within 60 to 90 days, Williams said.
Adding Barrett’s 2.1 trillion cubic feet of natural gas will nearly triple Williams’ reserves, giving it a secure supply for its commodity trades at a time of red-hot prices.
Williams expects the acquisition to immediately add to its earnings. It plans to keep most of Barrett’s 237 employees.
