Activist investor Jana Partners' Barry Rosenstein has taken a 5.8% stake in oil and gas producer EQT Corp. (EQT) and is seeking to block the company's proposed $6.7 billion acquisition of Rice Energy Inc., (RICE) according to a person familiar with the situation.
Rosenstein is seeking to have EQT fully divest its pipeline operations, he added, with a focus on making EQT a focused exploration and production company. Also, the person familiar with the situation noted that Jana Partners questions the benefits of the deal. The combination would make EQT the largest natural gas producer in the U.S., by volume, the two companies say.
Jana Partners could launch a director election contest at EQT to block the deal. However the fund's initial goal is to get EQT investors to vote down the merger first, he added. Already, the activist fund has recruited three dissident director nominees it could nominate at EQT's next annual meeting, according to a person familiar with the situation.
However, the Rice acquisition is expected to close in the fourth quarter of 2017, well in advance of EQT's next annual meeting, which will take place in April. Nevertheless, it is possible that Jana Partners campaign could convince other investors to come out publicly to oppose the transaction, a situation that could drive EQT to change its strategic approach.
EQT said in a statement responding to the Jana Partners campaign that it acknowledges that there is a sum-of-the-parts discount when considering both its oil and gas production and midstream assets. The company said has committed to evaluating options and devising a plan to address the discount by the end of 2018.
The move comes after EQT enlisted Wells Fargo Securities LLC to market its assets in the Midland Basin, an auction that could garner around $100 million in a sale. That's well short of the $550 million the company paid for the assets in 2014, The Deal learned.
The Deal reported earlier this month that rumblings of an EQT asset sale in the Midland Basin, a subformation of west Texas' lucrative Permian Basin, have been circulating for some weeks, even before the company announced its Rice Energy acquisition on June 19.
But a marketing presentation obtained by The Deal on Tuesday, June 27, confirms that the process kicked off this month for the 68,500-net-acre package in Texas' Glasscock and Sterling counties that boasts current net production of 3,900 barrels of oil equivalent per day, 56% of which is liquids