Its stock jumped nearly 24 per cent to around $60 in afternoon trading.
Williams said ETE's bid significantly undervalues the business, but that it was exploring other strategic options.
ETE confirmed Monday that it had offered $64 per share, a 32 per cent premium to Williams' closing price Friday. It put the deal's total value at $53.1 billion, including debt and other liabilities.
Energy Transfer Equity LP, of Dallas, says it's made multiple attempts over the last six months to negotiate with Williams' senior management.
Energy experts have been predicting more consolidation in the energy transportation sector, especially in natural gas given the huge reserves only recently unlocked by new drilling methods.
The deal would give ETE access to Williams' assets in the U.S. Northeast. Most of ETE's operations are in the Midwest and South.
Williams, based in Tulsa, Okla., recently announced plans to acquire the remaining stake of Williams Partners LP that it doesn't already own. ETE's offer was contingent on Williams ending its plans to acquire Williams Partners.
Shares in some Canadian energy infrastructure companies also rose on Monday.
The two biggest names — Enbridge Inc. (TSX:ENB) and TransCanada (TSX:TRP) — were up 2.5 per cent and 2.1 per cent, respectively, in afternoon trading.
Some of their smaller counterparts were also up: Keyera Corp. (TSX:KEY) by about 5.4 per cent, Pembina Pipeline Corp. (TSX:PPL) by 2.2 per cent and Veresen (TSX:VSN) by about 3.1 per cent.
"There's a lot of speculation and I kind of take the speculation with a little bit of a grain of salt," said Dirk Lever, an analyst at AltaCorp Capital. "Some of the speculation is 'well, the U.S. players are going to come up and buy the Canadian guys.'"
It's hard to tell at this point whether ETE's bid is the start of a consolidation trend in the pipeline sector or just a one-off, said Lever, who doubts big U.S. players would find many enticing bargains north of the border.
But Lever said perhaps the takeover hubbub is highlighting a segment of the energy industry that's been unfairly punished recently. Pipeline shares have pulled back in recent months amid the wider energy doldrums as commodity prices have plunged.
"People have been shying away from anything that says energy," said Lever. "This might get people going 'you know what? Maybe this aspect of energy is safer than those that are directly driven by commodity prices.'"
Calgary-based Veresen and Williams are partners in a pipeline project that would ship natural gas to a proposed liquefied natural gas terminal in Oregon.
Williams also has petrochemical operations in Alberta, processing offgas from the oilsands into more valuable products.
— With files from The Canadian Press