Targa Resources Rebuffed Takeover Interest From Larger Rival Williams

(Bloomberg) -- Targa Resources Corp. rebuffed informal takeover interest from larger rival Williams Cos. in recent months, people with knowledge of the matter said, in another signal of the sustained appetite for consolidation in the pipeline industry.

The Houston-based natural gas pipeline operator viewed the overture from Williams as undervaluing the company, according to the people, who asked not to be identified discussing confidential information. Williams is still discussing the feasibility of a transaction, the people said. 

There are no formal talks currently and it remains unclear whether the company will decide to pursue a deal, they said. A spokesperson for Tulsa, Oklahoma-based Williams said the company has not approached Targa about a potential deal and is not engaged in any discussions about doing so. A representative for Targa declined to comment. 

Williams’ shares were down about 2% at 10:28 a.m. in New York on Wednesday, giving the company a market value of roughly $54 billion. Targa’s stock was also down 2%, giving it a market capitalization of $32 billion.

At that size, any takeover of Targa would top Diamondback Energy Inc.’s $26 billion acquisition of fellow Permian Basin driller Endeavor Energy Resources LP — currently the biggest energy transaction of 2024. 

Deal Pipelines

The oil and gas sector has been a major driver of mergers and acquisitions activity this year. While this has largely been due to a wave of consolidation among US oil explorers seeking to secure future drilling sites in the Permian Basin, gas pipeline operators have also been striking deals. 

Building oil and gas pipelines in the US is difficult, as a result of legal challenges from environmental groups, political opposition in Democratic states and a glacial federal permitting process. Dealmaking in the sector has been mostly small-scale, though there are signs things are changing. 

Last month, US pipeline operator ONEOK Inc. agreed to buy Global Infrastructure Partners’ entire interest in EnLink Midstream LLC and also GIP’s equity interests in Medallion Midstream, the largest closely held crude gathering and transportation system in the Permian Basin. The deals were valued at a combined $5.9 billion.

Other big players in the gas pipelines sector include Energy Transfer LP, Kinder Morgan Inc. and Phillips 66.

Targa has been targeted before. In 2014, the company called off a sale to Energy Transfer Equity LP after news of the potential $15 billion deal sent Targa’s shares surging, making its board question whether the offer was high enough, people familiar with the matter said at the time.

(Updates shares, adds context on pipeline deals from fifth paragraph.)

©2024 Bloomberg L.P.