Williams gets the board fight it deserves

August 23, 2016

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. 

Williams is getting the proxy fight it deserves. Keith Meister, a pushy investor who recently quit as a director at the U.S. pipeline operator after a failed coup attempt, is back challenging the board with a whole new slate. Because of a deadline, however, the hedge fund’s nominees are merely stand-ins until real candidates can be found. The year of M&A helter-skelter for Williams makes this new madness somehow fitting.

Meister, the Carl Icahn protégé whose Corvex Management owns about 4 percent of $21 billion Williams, said on Monday that he plans to put forward 10 of his own employees to serve on the board. If voted in, they would be replaced by independent directors that Corvex intends to identify before shareholders submit their ballots on Nov. 23.

This bizarre – and maybe even unprecedented – maneuver seems par for the course at Williams, which recently announced plans to add three new independent directors. Under Chief Executive Alan Armstrong, the company had been trying to collapse its byzantine financial structure by absorbing its master limited partnership. Then Energy Transfer Equity came along with a takeover bid that Williams resisted for some time. Ultimately, Armstrong caved and accepted the $33 billion offer.

The deal quickly devolved into farce as oil prices collapsed. Energy Transfer twisted its way out, first by undermining its own transaction and then winning on a courtroom technicality. Armstrong, who had been forced to back a sale he had opposed, found himself under siege but ultimately prevailed. For good measure, he resisted another more recent takeover entreaty, from rival Enterprise Products Partners.

Corvex’s proxy by proxy only complicates matters further. As a director, Meister had been in position to push for change from the inside. What’s more, his position means he should have been well aware of the filing deadlines and lined up suitable board replacements in time.

This unconventional method instead will require Corvex to produce worthy candidates and for shareholders to trust that the hedge fund employees will abdicate as they say they will. Given the odd nature of the approach, there is also the chance for a legal challenge. For Williams these days, nothing – not even a proxy fight – is straightforward.

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