An hour and a half into trading on the New York Stock Exchange on June 16, Williams Cos. Inc. had added a whopping $8.6 billion to its market cap, or about 43% more than it had just offered to pay for Access Midstream Partners LP.

Suspense over Wall Street’s reaction was gone. The company had announced its $6 billion bid over the previous weekend and investors were showing their love. Their ardor would cool through the day, but not by much and by the time the market closed and 37.5 million shares had traded, unitholders who had stuck with Williams would have seen their stock rise an astonishing 77% over 12 months.

“Our quick math suggests that Williams is realizing roughly $5 billion in incremental value, or approximately $3.60 a share,” Morningstar’s Jason Stevens wrote in a note analyzing the deal price.

Jefferies LLC raised its rating from hold to buy and, along with Credit Suisse Group, elevated its price target to $65. Deutsche Bank was looking for $67. Wunderlich Securities Inc.’s Abhishek Sinha called the transaction “a net positive for ACMP [Access] unitholders,” as did Bradley Olsen and James Brideau of Tudor, Pickering, Holt & Co. (“impressively mind-numbing deal”) though their take was “clearly WMB [Williams] emerges as a relative winner.”

Why such enthusiasm? The new merged MLP, to be called Williams Partners LP, will control gathering and processing systems in the Marcellus, Utica, Piceance, Four Corners, Wyoming, Eagle Ford, Haynesville, Barnett, Midcontinent, Niobrara and deepwater Gulf of Mexico. Its Transco, Northwest and Gulfstream natural gas pipelines connect fields to a wide swath of the country.

“The merged Access-Williams Partners entity would be a No. 1 or No. 2 player in the most prolific natural gas basins in the country and would boast EBITDA of roughly $5 billion annually,” Stevens wrote.

Stevens’ other positives:

  • An “extra jolt” of growth and distributable cash flow; and
  • A “big step closer” to Williams becoming a pure-play general partner.

Investing in a relationship that promises to be rewarding—what’s not to love?

Joseph Markman can be reached at jmarkman@hartenergy.com or 713-260-5208.

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