UPDATE 1-Williams to split into two companies
July 24, 2000 05:04 PM
(Adds analyst comments starting with eighth paragraph and details. Updates stock price.)
TULSA, Okla., July 24 (Reuters) - Williams Cos. Inc. WMB on Monday said its board approved a plan to split into two companies -- one for its energy division and the other for its communications businesses.
"While the specific course of action has not been determined, it is envisioned the process would take no more than 18 months," Chief Executive Officer Keith Bailey said.
He said any change from the current ownership structure would be contingent upon a number of factors, including ensuring favourable tax treatment for Williams' shareholders.
"We believe these steps are the best way to ensure that both our energy and communications businesses have the efficient and effective access to the capital necessary to pursue the substantial growth opportunities that each enjoys," Bailey explained.
Williams was the big gainer among the 40 components of the Standard & Poor's Utility Index -- and one of only 11 issues closing higher -- adding 13/16 to close at 42-11/16.
Last October, the company sold a portion of Williams Communications WCG in public and private equity offerings. Williams retains ownership of about 85 percent of Williams Communications.
Its shares closed off 7/8 at 28-1/2 Monday.
Commenting on the board's weekend authorisation, PaineWebber analyst Ron Barone said, "We had repeatedly discussed the increased odds for such a separation in recent months, after detecting a change in management's position on the subject during recent conference calls and discussions."
Although no announcements have been made yet, Barone said, "we would also not rule out the sale of non-core Energy assets to further improve the profitability of (Williams') Energy operations.
The analyst continues to suggest an ongoing active accumulation stance on Williams shares, reflecting the ongoing turn-around in the company's energy operations, the strategic position of Williams Communications, and the substantial valuation-upside presented by the separation of these two business.
Given Monday's announcement, "our current 12-month $55 per share (Williams) price target ... appears conservative. We will consider raising this target after second quarter results are released and more details on a separation strategy are provided," Barone concluded. |
