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The Williams Companies - Lehman Brothers Collection

The Williams Companies

List of Deals

The Williams Companies, Inc., traces its origins to 1908, when brothers S. Miller Williams Jr. and David R. Williams were working for a construction contractor who had an order to pave sidewalks in Arkansas. The contractor pulled out when funding for the project was delayed, but the Williams brothers decided to finish the job themselves. They stayed in the construction business after completing the job and began working under the name the Williams Brothers Corporation. They eventually established steel-pipeline construction as their specialty, and in 1924 they moved to Tulsa, Oklahoma, in the heart of oil and gas country. The petroleum and natural gas industries were not the company's only customers, however; it also helped lay a water line for the U.S. Navy between Homestead and Key West in Florida.

In 1949 the Williams brothers sold the company to their nephew John, his brother Charles, David Williams Jr., and six middle managers. The new owners reincorporated under the name Williams Brothers Company. The new Williams Brothers' first job was to build a pipeline from Baton Rouge, Louisiana, to Greensboro, North Carolina. The company received a $7.5 million contract for the job, but flooding caused by unusually heavy rains damaged the company's equipment, and the company lost $800,000 on the job. Within five years, Williams Brothers had made enough money to pay off its initial debt. In 1957, with a net worth of $8 million, the company went public.

The company had established itself as a leader in its field by the beginning of the 1960s, but a severe slump in the demand for new pipelines threatened its profitability. In 1963 the company lost $4 million on its domestic operations, and only strong overseas business limited its overall net loss to $500,000. In 1965 the company saw its first chance to diversify, when Great Lakes Pipe Line Company went up for sale. The Great Lakes pipeline network was the longest in the United States, and its purchase price was $287.6 million. Williams Brothers net worth at that time was only $27 million. In lining up the financing for the deal, the company had to borrow almost the entire amount, making it a leveraged buyout that would be audacious even by the standards of the leveraged buyout mania that would grip Wall Street twenty years later. Williams Brothers paid only $1.6 million of its own cash for Great Lakes Pipe Line. In 1969 the company acquired Edgcomb Steel Company, which processed and distributed metal products in the East and Midwest. At the same time, Williams Brothers began to look into the fertilizer business as another possibility. Fertilizer manufacturers were then suffering from low demand and oversupply, and the Williamses wanted to buy into the business while such companies were cheap.

In 1971 the company acquired the Suburban Companies, a liquid-propane gas retailer. It also bought Colonial Insurance Company. Uncharacteristically, the company had not secured a competent insurance executive ahead of time to take charge of Colonial, and it floundered and was sold three years later. In 1971 the company changed its name to Williams Companies, to reflect its diversified businesses. That same year, Williams entered the fertilizer field when it acquired Gulf Oil Corporation's agrichemical operations. The next year, it added Agrico Chemical Company, Continental Oil Company's fertilizer subsidiary, and merged the two operations under the Agrico name. Fertilizer prices turned up almost immediately following these purchases. In 1974 Williams as a whole posted $950 million in sales—up from $235 million in 1970—and more than half of that figure was supplied by Agrico. The company formed a new subsidiary in 1974, Williams Exploration Company, and branched out into the business of drilling for and producing oil and natural gas.

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