Let’s put the recent price action in Energy Transfer Equity (NYSE: ETE) into perspective.

Its unit price was at a record high on June 15. By that point, Enterprise Products Partners (NYSE: EPD) was down 22% from the prior year’s peak. Williams (NYSE: WMB), which was still trying to keep a lid on Energy Transfer’s merger advances, was off 20%.

But there was ETE levitating above the carnage. A 37% annual distribution growth rate can be hard to pass up. Especially since the can’t-lose dealmaker behind that bonanza was openly searching for more bargains.

Within the week Energy Transfer would go public with its pursuit of Williams. Its unit price has now dropped 35% from that high in four months. The Alerian MLP Index is “only” down 20% over the same span. So clearly ETE is outperforming no longer, and just as clearly the market has some concerns about the Williams merger that Energy Transfer founder Kelcy Warren finally secured last month.

And yet the current reduced price now that the shale boom had bit the dust is still at levels that represented a new record high for ETE just 19 months ago. EPD has been knocked down all the way to its highs from the first half of 2013, and Kinder Morgan (NYSE: KMI) is back to where it was in early 2012, which tells you mostly just how much ETE outperformed in recent years.

The older midstream empires exploited the advantages of general partner profit skimming during their own rapid growth phase and then merged the GP with the affiliated MLP(s) as growth slowed. Energy Transfer still retains that option. But it seems intent for now on retaining the advantages of managing large pools of outside capital even if that capital is at the moment far from cheap.

Warren is certainly not assuming the industry’s current depressed state represents any kind of “new normal.” For example, Energy Transfer keeps pushing its Lake Charles LNG project along even though it’s hard to see who’ll buy this liquefied natural gas while current oil prices make the trade uneconomical.

In the Williams deal, Energy Transfer is targeting a $2 billion boost in annual profits by 2020 from “commercial synergies,” equal to 20% of the combined company’s current EBITDA (earnings before interest, taxes, depreciation and amortization). Near the top of that list is funneling the natural gas liquids gathered by Williams in the Marcellus and the Utica toward the nearby Marcus Hook Atlantic export  terminal being expanded by another Energy Transfer affiliate, Sunoco Logistics (NYSE: SXL).

Source: Energy Transfer presentation

ETE was recently ranked as our #2 Best Buy, so we clearly share Warren’s high expectations for a partnership that, despite everything that’s transpired of late, has still produced a 69% total return in a little more than two years since we recommended it.

Energy Transfer has said ETE will maintain its current distribution growth for longer as a result of the Williams deal, implying no slowdown through at least the next year. 

But the terms of the Williams merger and the high likelihood that it will be consummated, along with the usual arbitrage spread between ETE and WMB, suggest the latter may now be an even better buy.

The merger agreement equates each WMB share  to 1.8716 shares of ETC, the new corporate tracking stock ETE plans to issue to cover much of the acquisition cost. If Williams shareholders end up proportionally splitting the $6 billion of cash included in the deal, each WMB share would be exchanged for $8 in cash and 1.5274 ETC shares.

ETC shares are guaranteed by Energy Transfer to pay the same per-share dividend as ETE units through 2018, and come with contingent consideration rights that will reimburse holders with additional equity for any discount relative to ETE for two years following the deal close. (Conversely, if ETC were to trade at a premium to ETE over the same span ETE would get some of its units back as compensation.)

At recent prices (as of the afternoon of Oct. 15), WMB was trading at a 3.5% discount to ETE’s price for those planning to request all stock, and a 3.8% markdown assuming the receipt of the prorated $8 per share in cash under the buyout.

In addition, ETE currently yields 4.6% to WMB’s 6.2%. Assuming the merger concludes in six months, that’s a total return spread of 0.8% before taking into account the additional 10-cents-per-share dividend Williams shareholders are due right before the deal close.

Add it all up and Williams is currently trading at a dividend-adjusted discount of roughly 4.5% to its acquisition price. It’s a good way to buy into ETE’s growth on the cheap. Of course, the spread is there because there’s always a chance a merger deal falls apart, and if it were to do so WMB would instantly become no bargain. But the reason the spread is relatively small is because this merger is very likely to proceed. Warren is not known for backing out, and it would take an epic credit market implosion to deny him the cash he needs to get this done.

As Energy Transfer’s new C-corp dividend-paying tracking stock paying out dividends classified as return of capital for at least three years, ETC is likely to prove popular with institutional investors, who are typically restricted from investing more than 25% of even a specialized midstream portfolio in pass-through partnerships. And even if the tracking stock were to flop, holders would be compensated with additional equity.

The case for owning WMB is not so strong that you’d want to sell ETE to buy it, especially considering the likely tax implications. (The merger exchange will be tax-free other than for any cash received.)

But it’s strong enough for WMB to replace ETE as the #2 Best Buy. You’d still be buying into Energy Transfer Equity, but for a little less.