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Williams sets Barrett deal
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May 7, 2001: 12:58 p.m. ET
Oil company adds to natural gas reserves with $2.5 billion merger
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NEW YORK (CNNfn) - Williams Cos. Monday agreed to buy natural gas producer Barrett Resources for about $2.5 billion in cash and stock, topping a rival bid from Royal Dutch/Shell Group and winning new huge reserves of natural gas.
The deal, which has been approved by the boards of both companies, includes a first-step cash tender offer of $73 a share for 50 percent of the outstanding Barrett common stock, followed by a second-step exchange of Williams stock for each remaining share of Barrett stock.
Royal Dutch/Shell Group withdrew its takeover bid and said it would discontinue any further efforts.
Tulsa, Okla.-based Williams will also assume about $300 million of Barrett debt, Williams said in a statement.
 Denver-based Barrett had been an attractive merger target for both Williams and Royal Dutch/Shell for its significant presence in the Rocky Mountain region, which is becoming increasingly valuable to gas producers because of declining production in the traditional markets of Texas and the Gulf of Mexico.
At the end of last year, Williams had 1.2 trillion cubic feet of natural gas reserves while Barrett's were 2.1 trillion cubic feet as of March 31.
"We will accomplish this in a manner that we expect to be immediately accretive to earnings, that strengthens our balance sheet and improves our credit ratios," Williams (WMB: down $3.36 to $38.31, Research, Estimates) Chairman Keith Bailey said. "We are also gaining ... abundant and ideally situated energy resources that we expect to be in increasing demand over time."
Shell's withdrawal ends a takeover battle that began with a $55 a share bid in early March, which Barrett rejected. Barrett also rejected a revised $60 bid from Shell last week.
Shell's $2 billion bid in March prompted Barrett (BRR: up $1.98 to $69.28, Research, Estimates) to put itself up for sale in a formal auction.
Williams was one of a few companies last week submitted bids for Barrett last week. Williams was forced to disclose its interest in Barrett after Wall Street analysts mistakenly were patched into a conference call in which board members were discussing a potential bid. 
- from staff and wire reports
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