A Williams Cos Inc board member testified she felt pressured by her own company to support a $20 billion merger with pipeline company Energy Transfer Equity LP, which ETE lawyers sought to depict as proof that Williams misrepresented its board’s support for the deal.
The two companies are suing each other as Energy Transfer Equity, or ETE, looks for a way to back out of the deal, which would create one of the world’s largest operators of pipeline to carry oil and gas.
The two-day trial in Delaware’s Court of Chancery before Vice Chancellor Sam Glasscock opened on Monday.
Williams is asking the judge to force ETE to complete the takeover, alleging that the company and its chief executive, Dallas billionaire Kelcy Warren, have purposely worked to scuttle the agreed-upon deal.
ETE has countersued, arguing that Williams has breached the merger agreement, in part by misrepresenting the level of its board’s support for the deal.
On Monday, ETE lawyers played video deposition testimony of director Kathleen Cooper which they said illustrated that Williams board members were threatened with the risk of a campaign to have them removed if they did not support the deal.
Cooper voted against the deal. She was among the five directors on Williams’ 13-member board who did not back the takeover.
Asked during her deposition earlier this month if she had felt threatened to change her vote, she said she did.
Williams’ chairman, Frank MacInnis, downplayed Cooper’s testimony and said the board discussed the possible fall-out from a vote against the deal.
“There was never a threat,” MacInnis told the court.
The two-day trial comes just days before a scheduled June 27 vote by Williams shareholders on whether they want to accept the deal proposed in September by ETE.
While the deal was long-sought by Warren, Williams said he soon came down with buyer’s remorse and began to search for a way out as an energy price slump deepened.
ETE has made clear that it believes the deal is no longer attractive. It has slashed estimates for expected cost savings and said it would likely have to cut distributions to shareholders entirely next year if it has to complete the deal.
ETE has argued the deal cannot close because its lawyers at Latham & Watkins were unable to declare that it would be tax-free. The company originally raised the tax problem in April and rejected two possible solutions proposed by Williams.
Williams sued in May, accusing Warren of failing to meet its obligation to try to get the merger done by June 28, when ETE can walk away without penalty.
Williams’ legal team on Monday showed a video deposition of Jamie Welch, who was fired earlier this year as ETE’s chief financial officer.
He said that as early as January, Warren had grown opposed to the deal. He began pressing his management team and lawyers to understand ETE’s rights with respect to terminating the deal.
“He feared for the future of the Energy Transfer enterprise if the deal with Williams had to close on its current terms,” Welch said in the video played in court. He said Warren feared an “implosion” of the business.