WMB/WPZ Merger FAQ

WMB/WPZ Merger FAQ

  1. Each WPZ Public Unitholder will be entitled to receive Williams Common Stock in exchange for such holder’s WPZ Public Units at the Exchange Ratio (1.494 shares of Williams Common Stock for each one WPZ Common Unit). If the Exchange Ratio would result in a WPZ Public Unitholder being entitled to receive a fractional share of Williams Common Stock, such holder will receive cash (payable in U.S. dollars, without interest) in lieu of such fractional share in an amount equal to the product obtained by multiplying (1) such fraction by (2) the average of the closing price of Williams Common Stock as reported on the NYSE Composite Transactions Tape (as reported by Bloomberg Financial Markets or such other source as the parties shall agree in writing) over the five-trading-day period ending on the third trading day immediately preceding the effective time of the Merger. For additional information regarding exchange procedures, please read “The Merger Agreement — Exchange of Units; Fractional Units.”

  2. No. After the Merger is completed, holders of WPZ Units who hold their WPZ Units in certificated or book entry form will receive written instructions for exchanging their WPZ Units. If you own WPZ Units in street name, the shares of Williams Common Stock you will receive in connection with the Merger should be credited to your account in accordance with the policies and procedures of your bank, broker, or other nominee within a few days following the closing date of the Merger.

  3. Williams’s investor relations department is not staffed by tax personnel and Williams’s personnel do not provide tax advice.  If you have tax-related questions, please contact a tax advisor familiar with partnership taxation and specifically the taxation of Master Limited Partnership unitholders.

  4. The receipt of Williams Common Stock and any cash in lieu of fractional shares of Williams Common Stock in exchange for WPZ Public Units pursuant to the Merger should be a taxable transaction to U.S. holders (as defined in the section titled “Material U.S. Federal Income Tax Consequences”) for U.S. federal income tax purposes. In such case, a U.S. holder will generally recognize capital gain or loss on the receipt of Williams Common Stock and any cash received in lieu of fractional shares of Williams Common Stock in exchange for WPZ Public Units.  However, a portion of this gain or loss, which portion could be substantial, will be separately computed and taxed as ordinary income or loss to the extent attributable to assets giving rise to depreciation recapture or other “unrealized receivables” or to “inventory items” owned by Williams Partners and its subsidiaries.  Passive losses that were not deductible by a U.S. holder in prior taxable periods because they exceeded a U.S. holder’s share of Williams Partners’ income may become available to offset a portion of the gain recognized by such U.S. holder.

    You can estimate your gain or loss from the transaction through the following process.  This calculation is an estimate only.  You will not be able to calculate your actual, final tax effect from this transaction until you receive your final Schedule K-1 and supporting materials (expected to be delivered in March, 2019).

    1. Calculate your estimated consideration received in the transaction by multiplying the number of WPZ units you own by 1.494 to estimate the number of whole shares and cash in lieu of fractional shares of WMB common stock you will receive. Multiply the number of whole shares by the closing price of WMB stock on the transaction close date, $31.79 per share, to determine the estimated “sales price.”
    2. If the exchange ratio from Step 1 results in a fractional share of WMB common stock, you will receive cash in lieu of the fractional share. No fractional shares of WMB common stock will be issued. Cash in lieu of fractional shares will be computed by multiplying the fractional interest by the average of the closing WMB share price over the five-trading-day period ending on the third trading day immediately preceding the transaction closing date (such average price calculated to be $31.02 per share). Add cash received in lieu of fractional shares to the “sales price.”
    3. Reduce the “sales price” by your estimated adjusted tax basis in WPZ units.  Your ending capital account amount outlined on your December 31, 2017 Schedule K-1 may provide an approximation of your ending tax basis for all units owned at December 31st.  The ending capital account amount includes your original cost of units, as reported to WPZ by your broker and other adjustments affecting tax basis.  However, brokers do not always report original cost or the original cost reported may be incorrect.  Any incomplete or incorrect reporting by the broker can cause the ending capital account to be incorrect.
    4. Further reduce this basis number at December 31, 2017, by any WPZ distributions you receive in 2018.
    5. Any 2018 WPZ taxable income or loss before the transaction will also be allocable to you. Taxable losses allocable to you will reduce your basis and increase your realized gain on the transaction, while any taxable income allocable to you will increase your basis and decrease your realized gain on the transaction.
    6. Any ordinary gain generated from the transaction may be reduced by any passive loss carryforwards, to the extent such passive loss carryforwards are available.

    The tax consequences of the transaction to each WPZ unitholder will be unique and depend on the WPZ unitholder's particular facts and circumstances. You should consult your own tax advisor to determine the specific consequences to you of the transaction, including under the laws of any applicable state, local or foreign jurisdiction, and under any applicable U.S. federal laws other than those pertaining to income taxes.

  5. The taxable transaction should have state income tax consequences.  Your most recent Schedule K-1 will report state apportionment factors to help estimate your state income tax impact.  You should consult your own tax advisor to determine the specific consequences to you of the transaction.

  6. WPZ unitholders:  WPZ unitholders will receive a final Schedule K-1 and supporting materials (expected to be delivered in March, 2019).  WPZ unitholders should also receive a Form 1099-B from their broker.

         WMB stockholders:  You will not receive any tax documents as a result of the transaction.

  7. A U.S. holder’s tax basis in any shares of WMB common stock received in the transaction should equal the closing WMB share price on the transaction close date, August 10, 2018.  The WMB closing share price on August 10, 2018 was $31.79.  A U.S. holder’s holding period for any shares of WMB common stock received in the transaction on August 10, 2018, begins August 10, 2018.

  8. In general, holders of WPZ units received 1.494 shares of WMB common stock for each WPZ unit.  However, no fractional shares of WMB common stock were issued.  Instead, holders of WPZ units received cash in lieu of fractional shares.

  9. WPZ Units will no longer be publicly-traded following the Merger and will be delisted from the NYSE.

  10. If the Merger is successfully consummated, all outstanding WPZ Public Units will be converted into the right to receive Williams Common Stock at the Exchange Ratio and will no longer receive quarterly distributions from Williams Partners. For a description of the differences between the rights of holders of Williams Common Stock and holders of WPZ Units, please read “Comparison of Rights of Williams Stockholders and WPZ Unitholders.”

  11. The receipt of Williams Common Stock and any cash in lieu of fractional shares of Williams Common Stock in exchange for WPZ Public Units pursuant to the Merger should be a taxable transaction to U.S. holders (as defined in the Williams and Williams Partners joint consent statement/proxy statement/prospectus section titled “Material U.S. Federal Income Tax Consequences”) for U.S. federal income tax purposes. In such case, a U.S. holder will generally recognize capital gain or loss on the receipt of Williams Common Stock and any cash received in lieu of fractional shares of Williams Common Stock in exchange for WPZ Public Units. However, a portion of this gain or loss, which portion could be substantial, will be separately computed and taxed as ordinary income or loss to the extent attributable to assets giving rise to depreciation recapture or other “unrealized receivables” or to “inventory items” owned by Williams Partners and its subsidiaries. Passive losses that were not deductible by a U.S. holder in prior taxable periods because they exceeded a U.S. holder’s share of Williams Partners’ income may become available to offset a portion of the gain recognized by such U.S. holder. See the section titled “Material U.S. Federal Income Tax Consequences” for a more complete discussion of certain U.S. federal income tax consequences of the Merger.

  12. Williams is classified as a corporation for U.S. federal income tax purposes, and thus, Williams (and not its stockholders) is subject to U.S. federal income tax on its taxable income. A distribution of cash by Williams to a stockholder who is a U.S. holder (as defined in the section titled “Material U.S. Federal Income Tax Consequences”) will generally be included in such U.S. holder’s income as ordinary dividend income to the extent of Williams’ current or accumulated “earnings and profits” as determined under U.S. federal income tax principles. Any portion of the cash distributed to Williams Stockholders by Williams after the Merger that exceeds Williams’ current and accumulated earnings and profits will be treated as a non-taxable return of capital reducing a U.S. holder’s adjusted tax basis in such U.S. holder’s shares of Williams Common Stock and, to the extent the distribution exceeds such stockholder’s adjusted tax basis, as capital gain from the sale or exchange of such shares of Williams Common Stock. See the section titled “Material U.S. Federal Income Tax Consequences” for a more complete discussion of certain U.S. federal income tax consequences of owning and disposing of shares of Williams Common Stock.

  13. Williams and Williams Partners joint consent statement/proxy statement/prospectus providing detailed information about the proposed Merger may be accessed on the SEC website here.

  14. If WPZ Unitholders or Williams Stockholders have further questions or if they would like additional copies, without charge, of this document, they may call Williams Partners’ or Williams’ Investor Relations Departments at 800-600-3782, or may contact OKAPI Partners LLC (“Okapi”), which is acting as Williams’ proxy solicitation agent in connection with the Williams Special Meeting, by phone at (888) 785-6617 or email at williamsinfo@okapipartners.com.