Williams Cos. to acquire Mapco Inc. for 19.7 times earnings

Weekly Corporate Growth Report, Dec 1, 1997

The Deal: Williams Cos. has agreed to acquire Mapco Inc. in a stock transaction worth $246 billion and the assumption of $1 billion in Mapco debt Terms call for Mapco's shareholders to receive 0.8325 of a Williams share for every Mapco share held, or 1.665 shares after adjusting for a 2-for1 stock split Williams plans to pay December 29, 1997. The acquisition of Mapco is expected to increase William's 1998 operating earnings by 10% to 15%, excluding a one-time merger-related charge in the first quarter On the news, Mapco jumped $5.3125, or 13.9%, to $43.4375/ share. Williams fell $1.625, or 29%, to $53.8125/ share.

Discussion: There has been a push by energy companies to expand into nonregulated businesses. The deal would mark Williams' entry into refining and is the second acquisition agreement announced in as many days that involves a pipeline company expanding its nontraditional business units. Sonat Inc. has agreed to acquire privately held Zilkha Energy Co. for $1.04 billion in stock.

Mapco, via its Thermogas unit, is the nation's fourth-largest retail marketer of propane. It also owns a 7,619-mile network of pipelines that carry natural gas liquid to the Midwest and Gulf Coast regions.

Analysts feel that more energy-industry mergers are likely as pipeline and natural gas companies pursue faster growth through businesses that either are or will soon be regulated.

Williams, despite being best known for its vast pipelines, also has an extensive natural gas gathering and processing unit and a large energy trading operation.