(The author is a Reuters Breakingviews columnist. The opinionsexpressed are her own.)
By Lauren Silva Laughlin DALLAS, May 17 (Reuters Breakingviews) – Energy firms arestuffing their subsidiaries’ minority shareholders into a pipe.On Thursday Williams Companies , Enbridge andCheniere Energy each announced deals to buy the stakesin their master limited partnerships that they don’t alreadyown. Williams is offering just a 6 percent premium, while itstwo peers put virtually nothing on the table. The reason for subsuming their MLPs is sound enough. InMarch the Federal Energy Regulatory Commission eliminated acrucial tax break for these pipeline companies. Uncle Samdoesn’t impose a levy on MLPs’ earnings, but does allow some ofthem to factor an income-tax allowance into what they chargedcustomers. That increased what the latter paid – and effectivelygave MLP investors, who do pay tax on their own income, anadditional break. Pipeline companies that are not set up as MLPs, likeWilliams Companies, Enbridge and Cheniere, can still takeadvantage of the loophole. So consolidating their subsidiariesmakes sense. It means revenue shouldn’t fall, will allow theparent companies to keep all the earnings rather than dolingsome out to other shareholders, and simplifies their corporatestructures. Moody’s has already put Williams Companies underreview for a credit upgrade because of its deal. Minority MLP investors, though, have not been so lucky.Market values have largely fallen since the FERC decision onfears of lower income. Williams is at least essentially makinginvestors whole on their losses following the FERC decision.Cheniere seems only to be offering 1 percent more thanWednesday’s closing price, while Enbridge appears to be doing ano-premium swap for three of its four units. Rival Oneok , meanwhile, plonked down a 22 percent premium for itsMLP before the FERC announcement. Granted, only in cash offers do minority shareholders havemuch leverage to avoid being squeezed out by the majority owner.Thursday’s deals are all in stock. Investors can still kick up afuss, and even threaten to contest the offer in court. Williams, Enbridge and Cheniere might consider upping theirbids just to avoid the hassle. The shares for the MLPs inquestion are all trading above the offer prices, suggestingthat’s a distinct possibility. Investors have nothing to lose bytrying. On Twitter CONTEXT NEWS – Williams Companies, Enbridge and Cheniere Energy eachannounced on May 17 that they would buy the minority stakes intheir affiliated master limited partnerships that they don’talready own. – The deals, all announced on May 17, are a response to theFederal Energy Regulatory Commission in March removing a taxbreak that allowed MLPs to increase rates to pipeline holders toaccommodate for taxes that its owners paid on income. – Williams Companies has offered a stock-for-unit exchangeratio of 1.494 Williams shares for each Williams Partners unit. The deal, valued at some $10.5 billion, equates toa roughly 6.4 percent premium to the previous day’s closingprice. – Enbridge said it would buy the shares of four separatelisted entities to simplify its structure. Of these, three arebeing done as an exchange for stock with ratios equivalent tothe trading price of each entity's shares or units the priorday, while the fourth carries a 5 percent premium. – Cheniere Energy is offering 0.45 Cheniere shares for eachoutstanding publicly held share of Cheniere Partners Holdings , or $28.24 per common share, a roughly 1 percent premiumto the previous day's close. – For previous columns by the author, Reuters customers canclick on – SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS (Editing by Antony Currie and Martin Langfield)