The companies said Monday that the combination creates one of the five biggest energy companies in the world.
Energy Transfer Equity will pay $43.50 per share, a 4.6 percent premium to Williams' Friday closing price of $41.60.
Williams' shareholders can choose either shares of Energy Transfer Equity affiliate Energy Transfer Corp., cash or a combination of both.
The companies put the deal's value at about $37.7 billion, including debt and other liabilities.
Williams' stockholders will also receive a one-time special dividend of 10 cents per share that will be paid immediately before the acquisition closes.