EQT Corp.’s $5.2 billion acquisition of Tug Hill Inc.—long delayed due to regulatory scrutiny—has finally received approval to proceed.
The U.S. Federal Trade Commission resolved its review of EQT’s agreement to acquire Tug Hill’s upstream assets and XcL Midstream’s gathering and processing assets in the Appalachia region, EQT announced in an Aug. 16 news release.
“We are pleased the FTC has completed its review and we are now able to bring the acquisition of Tug Hill and XcL Midstream to a close,” EQT President and CEO Toby Rice said. “This acquisition will lower EQT's cost structure, reduce EQT's development risk, and increase cash flow and net asset value per share, while maintaining our investment grade balance sheet.”
EQT said it anticipates closing the deal within the next seven business days.
Tug Hill and XcL Midstream are backed by equity commitments from Quantum Energy Partners-managed funds.
The FTC said it resolved certain antitrust concerns surrounding the $5.2 billion cash-and-stock deal between EQT and Quantum Energy Partners by approving a consent order “that prevents entanglements between the two companies and the exchange of confidential, competitively sensitive information,” according to an Aug. 16 release from the commission.
The FTC’s consent order prohibits Quantum from occupying a seat on the EQT board of directors and requires the private equity firm to divest its EQT shares. The order prevents Quantum from serving on boards of any of the top seven Appalachian natural gas producers without FTC approval.
The commission said it was its first case in 40 years that enforced Section 8 of the Clayton Act, which is aimed at prohibiting interlocking directorates—when an officer or director of one firm simultaneously serves as an officer or director of a competing firm.
“As originally structured, this deal would have resulted in an illegal interlocking directorate, facilitated the exchange of confidential and competitively sensitive information, and otherwise stifled competition in the Appalachian Basin,” said Nathan Soderstrom, acting deputy director of the FTC’s Bureau of Competition, in the release. “The Commission’s order provides innovative and comprehensive relief to protect competition, as well as the millions of Americans who rely on Appalachian Basin natural gas to heat and power their homes.”
Tug Hill is the 11-largest natural gas producer in the Appalachia Basin, according to the FTC. XcL Midstream transports and processes Tug Hill’s natural gas production.
Under the terms of the deal—first announced in September 2022—EQT would pay $2.6 billion in cash and issue another $2.6 billion, or 55 million shares, of EQT common stock.
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