By Liz Hoffman and Alison Sider

Energy Transfer Equity LP can escape its deal to buy rival pipeline operator Williams Cos. after a Delaware judge ruled that its fears of an unexpected tax bill were genuine and not -- as Williams had argued -- a ploy to get out of an acquisition it no longer wanted.

Vice Chancellor Sam Glasscock III ruled Friday that Energy Transfer's lawyers weren't deliberately sandbagging the merger when they said they couldn't deliver a necessary opinion letter on the deal's tax treatment. The merger agreement requires Energy Transfer to produce the opinion letter before the deal can close.

Williams had accused Energy Transfer of using the tax issue to wriggle out of the takeover, which its empire-building chairman, Kelcy Warren, had come to regret as the oil bust dragged on.

"Motive to avoid a deal does not demonstrate lack of a contractual right to do so," Mr. Glasscock wrote. "A desperate man can be an honest winner of the lottery."

The two-day trial this week in the Delaware Court of Chancery had been closely watched by deal makers far beyond the energy patch. Buyer's remorse on such a large scale is unusual, and the fact that this trial hinged on legal opinions and tax structuring, the critical sausage-making that is often taken for granted in big takeovers, fanned interest among mergers-and-acquisitions specialists.

Write to Liz Hoffman at liz.hoffman@wsj.com and Alison Sider at alison.sider@wsj.com

(END) Dow Jones Newswires

June 24, 2016 17:02 ET (21:02 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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