Barely a month after announcing a major acquisition of its own, The Williams Companies Inc. (NYSE: WMB) has rejected an all-equity buyout made  from Energy Transfer Equity LP (NYSE: ETE) valued at about $53 billion, including debt. Energy Transfer offered to pay $64 per share for all of Williams’s outstanding shares.

Williams rejected the offer late Sunday saying it “significantly undervalues Williams and would not deliver value commensurate with what Williams expects to achieve on a standalone basis….” Williams also noted that Energy Transfer’s offer includes termination of Williams’s pending acquisition of Williams Partners LP (NYSE: WPZ) for around $13.8 billion in a stock-for-common unit transaction that was announced on May 13th.

While rejecting the Energy Transfer offer is a standard response to an unsolicited offer, what isn’t standard is that Williams also said that its board of directors has authorized the company to “explore a range of strategic alternatives” following the Energy Transfer offer.

Williams could have a tough time convincing its shareholders that turning down this deal is a good choice. As we noted when the Williams Partners deal was announced, unitholders in the company are almost certainly facing a (large) tax bill many may not have been expecting. The MLP structure does not eliminate taxes, it merely defers them until the common units are sold or exchanged. Even worse, it’s likely that the taxes will be assessed at the ordinary income rate, not the capital gains rate. When Kinder Morgan Inc. (NYSE: KMI) executed the same sort of transaction late last year, one analyst figured that unitholders in Kinder Morgan Energy Partners (KMP) effectively lost 4% on the deal.

That whole equity-exchange deal between Williams and Williams Partners is not something Energy Transfer wants to pay for. And who can blame them? Think about who stands to gain the most in the near-term from the Williams-Williams Partners deal? Not the common unitholders of Williams Partners, that’s for sure, and certainly not an acquirer like Energy Transfer.

Williams’s stock has jumped nearly 28% in Monday’s pre-market trading to $61.75, a new 52-week high if it holds into the regular trading session. The stock closed at $48.34 on Friday and the current 52-week range is $40.07 to $59.77.

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