Williams: No permanent allies

Nothing like a hostile takeover fight to unite a fractured boardroom. But such alliances born of convenience fray quickly. Williams Companies, a large US oil and gas pipeline operator, sold itself to rival Energy Transfer Equity in a $34bn deal last September. The Williams board, which contained two activist investors at the time, agreed to sell itself only by a thin majority, which did not even include the chief executive. As the energy market foundered through the winter, however, Energy Transfer’s commitment to the buyout waned. It seized upon a tax technicality that it believed would let it escape the agreement scot-free. A judge agreed, over the intense and united objections of Williams. But, as it turns out, the detente did not last.

The day after the ETE deal collapsed, Williams' two activist board members and four other directors resigned, citing their lack of confidence in the existing chief executive. Then, last week, one of the activist funds, Corvex Management, nominated a full slate of directors, 10, to dump the entire Williams board, an usually harsh move. Corvex has complained of cronyism on the Williams board, saying its ranks were not filled with the luminaries befitting such a huge company. 

Yet the stars that Corvex has found to nominate are unusual: 10 of its own employees. The byzantine rules for waging proxy fights did not allow Corvex the time to find in time the heroes it believes Williams deserves. It says that once its employees are elected as “placeholders”, they will cede their positions to an as yet-to-be determined dream team.

The legality of this novel scheme is, however, not quite certain and so the Williams incumbents may live to fight another day. But whoever is eventually chosen to run the company has big decisions to make. Williams’ shares have rallied 35 per cent since the ETE deal ended in late June. A strong endorsement of the incumbents? Not quite; more to do with the prospect of a takeover premium. Another huge pipeline company, Enterprise Products, has expressed interest in buying Williams and its prized Transco pipeline that runs from Texas to the north-east US. If Williams is ultimately acquired, finally there will be no board bickering with itself.

Email the Lex team at lex@ft.com