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June 17, 2011 5:55 AM

Dealmakers of the Week: William Finnegan and Sean Wheeler of Latham & Watkins

Posted by Tom Huddleston Jr.

Finnegan-wheeler
DEALMAKER
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William "Bill" Finnegan and Sean Wheeler, corporate partners in the Houston office of Latham & Watkins

THE DEAL

Dallas-based Energy Transfer Equity (ETE) agreed to pay $4.2 billion in stock for Southern Union Company, the companies announced Thursday, to create one of the largest natural gas pipeline companies in the country. 

THE CLIENT

ETE, a publicly traded partnership that owns the general partnership in natural gas pipeline companies Energy Transfer Partners and Regency Energy Partners.

THE DETAILS

ETE will give shareholders of Houston-based Southern Union newly issued ETE shares valued at $33 each in exchange for their Southern Union shares, representing a 17 percent premium over the company's Wednesday closing price. ETE will also assume $3.7 billion of Southern Union debt in the deal, which is expected to close in the first quarter of 2012, pending regulatory and shareholder approval. 

Bingham McCutchen served as ETE's tax counsel, while Southern Union engaged Locke Lord Bissell & Liddell and Roberts & Holland.

THE BIG PICTURE

Bloomberg notes that the transaction would be the largest purchase of a pipeline company this year, and it would allow ETE to expand in Florida, where Southern Union owns an interest in and operates Florida Gas Transmission and where natural gas makes up half of the power supply.

Should the deal go through, ETE's assets--including those of Southern Union, ETP, and Regency--would consist of more than 44,000 miles of natural gas pipelines. The group would have the capacity to transport roughly 30.7 billion cubic feet of natural gas per day--which is equal to nearly one-third of the country's daily gas consumption, according to Bloomberg.

Consolidation in the energy industry has been a driving force in the M&A market so far this year, starting with the $13.7 billion deal between Duke Energy and Progress Energy that would create the country's largest utility.

Latham opened its Houston office in January 2010 and soon after welcomed Finnegan and Wheeler from Vinson & Elkins and Baker Botts, respectively. The idea at the time was for the firm to use that outpost to expand its reach in the energy field. Now, Finnegan and Wheeler say that the plan is humming along.

The Houston office started with eight laterals, including Finnegan and Wheeler. Today that outpost boasts 11 partners and 30 associates, thanks to a mix of lateral hires from other firms, and transfers from other offices.

THE BACKSTORY

ETE is one of the clients from the energy sector that has contributed to Latham's growth in Houston.

Vinson & Elkins had been a longtime outside counsel for ETE during Finnegan's time at the firm. The current general counsel at Energy Transfer, Thomas Mason, is a former V&E partner who served as outside counsel to the company before joining it in 2007. After Finnegan and Wheeler helped establish Latham in Houston, Mason and Energy Transfer came calling.

"Tom [Mason] called me in August [2010] and asked if we wanted to start doing the Energy Transfer work, and we of course said 'Yes,'" Finnegan says.

In September, the two led the way on the pricing of $1.8 billion in unsecured notes for ETE. They were then conflicted out of working on a $1.93 billion deal in which ETE general partners ETP and Regency bought pipeline and natural gas liquids processing plants in Texas from LDH Energy Asset Holdings, a former client. 

"When this [deal] came along, Tom gave us a call and Sean and I got started on it," Finnegan says.

One possible reason Finnegan gives for Mason reaching out to their team--the two had worked together as summer clerks in 1979 and then traveled through Europe for two months after taking the bar exam. The two have been friends ever since. "Bill was thinking of client development back in the late-1970s," Wheeler jokes. 

ON CLOSING

ETE has been kicking the tires on Southern Union for roughly seven years, Finnegan and Wheeler note. Then, in 2006, the two companies became better acquainted when ETE bought 2,500 miles of Trans-western pipeline from Southern Union for $1.5 billion.

"The companies had been talking for a while at a very high level, but we were turned loose mid-May," Finnegan says about Latham getting the call for this deal. Roughly a month later, an agreement was in place.

One interesting aspect of the deal, the lawyers say, is that the Southern Union shareholders converting their shares will have the opportunity to receive shares in return from either ETE or its subsidiary ETP, depending on the circumstances. "It's got kind of a dual-conversion feature to it, where [the securities are] convertible into the parent or into the [subsidiary] of Energy Transfer Equity, so that's not something you see every day," Wheeler says.

One challenging side of the deal comes from the necessary regulatory approvals, which present especially arduous obstacles in the energy sector. For instance, Southern Union own natural gas local distribution companies in Missouri and Massachusetts, which will necessitate approval of the transaction from public utilities commissions in each of those states, as well as power plants in Pennsylvania that will require FERC approval. 

While that part of the transaction is the reason the deal will likely be pushed back to the beginning of 2012, the Latham lawyers are not overly concerned about the process. "I don't think we see any snags, but we've got more of our fair share of regulatory hurdles," Finnegan says.

 

Photos courtesy of Latham & Watkins

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