Energy Stocks on Activist Investors’ Hit Lists: Williams Cos. (WMB)
It’s a booming time for pipeline firms as America’s shale revolution has made owning the necessary infrastructure a profitable business. However, that hasn’t been the case at Williams Cos. (WMB).
Aside from its massive pipeline network, Williams owns a host of natural gas processing facilities. Low prices for natural gas have crimped margins for WMB, while concerns about cash flows at its master limited partnership, Williams Partners, LP (WPZ), has prevented the firm from keeping up with rival midstream players.
That prompted two different activist investors — Corvex Management and Soroban Capital Partners — to accumulate $2.5 billion worth of WMB stock back in February.
According to the activists, WMB “has a strong competitive position in an attractive industry with tremendous growth opportunities.” However, it just hasn’t met with expectations. To that end, the duo has been looking at a “strategic combination” (read: an outright sale or merger) of WMB to another larger midstream firm.
While that might be a tall order considering Williams’ $28 billion market cap, a merger of equals could happen. Longer term, that could be a great thing for its shareholders.