Natural-gas company Williams Partners L.P.'s stock soared 14% in premarket trade Wednesday, after gas infrastructure company Williams Companies Inc. announced an agreement to buy the public equity of Williams Partners in a stock deal valued at $13.8 billion. Under terms of the deal, which is expected to close during the third quarter, 1.115 shares of Williams will be exchanged for each Williams Partners' stock. Based on Tuesday's closing prices, the deal values Williams Partners' stock at $55.86 each, or an 18% premium. Williams expects the deal to meaningfully add to cash available for dividends. The company plans to raise its third-quarter dividend by 6.7% to 64 cents a share, and expects dividend increases of 10% to 15% a year through 2020. Williams owned 60% of Williams Partners ahead of the buyout agreement. Williams Partners' stock has lost 7.2% year to date, while Williams' shares have run up 11% and the S&P 500 has gained 2%.
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