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EQT-Quantum Energy Deal Faces FTC Check to Protect Competition
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EQT Corporation (EQT) and private equity firm Quantum Energy Partners’ $5.2-billion cash-and-stock merger faces antitrust concerns. The Federal Trade Commission (FTC) recently approved a consent order in an attempt to address these apprehensions. The consent order forbids the two companies from cooperating and exchanging confidential, competitively sensitive information.
In the Appalachian Basin — the largest natural gas-producing region in the United States — Quantum and EQT are direct competitors in the production and sale of natural gas. According to the FTC, permitting Quantum CEO VanLoh to join the board of EQT would result in an illegal overlap for companies that directly compete with one another to produce and sell natural gas from the Appalachian Basin.
The FTC’s consent order provides profound structural relief by prohibiting Quantum from holding an EQT board position, requiring Quantum to sell its EQT shares, forbidding the sharing of anticompetitive information, dissolving a separate anticompetitive joint venture between the two parties and imposing additional restrictions to safeguard competition.
The Clayton Act’s Section 8 forbids interlocking directorates, which is an arrangement in which an officer or director of one company also serves in that capacity for a rival company. This is the first case in 40 years, wherein the FTC has enforced this provision.
In a $5.2-billion cash and stock deal that had been announced in September 2022, EQT was successful in getting the FTC’s approval to conclude the acquisition of infrastructure company XcL Midstream and Quantum Energy-backed THQ Appalachia I LLC, also known as Tug Hill. Quantum could have become EQT’s largest shareholder by acquiring up to 55 million shares in the deal, but the FTC mandated that Quantum sells the shares.
The FTC’s suggested consent order alleviates the Commission’s concerns while simultaneously emphasizing the antitrust risks of excessive entanglements and anticompetitive information exchange.
Zacks Rank & Key Picks
Currently, EQT carries a Zack Rank #3 (Hold).
Some better-ranked stocks in the energy space are CVR Energy Inc. CVI, Evolution Petroleum Corporation EPM and Crestwood Equity Partners LP CEQP. While CVI sports a Zacks Rank #1 (Strong Buy), both EPM and CEQP carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
CVR Energy is an independent refiner and marketer of high value transportation fuels. Headquartered in Sugar Land, TX, CVI has 1,470 employees. It is also engaged in nitrogen fertilizer manufacturing business through its interest in CVR Partners, LP.
Evolution Petroleum is an independent energy company. It was formed to acquire and develop oil and gas fields and apply both conventional and specialized technology to accelerate production, particularly in low-permeability reservoirs. EPM has witnessed an upward earnings estimate revision for 2024 in the past 60 days.
Headquartered in Houston, TX, Crestwood is a master limited partnership that provides a wide range of fee-based infrastructure solutions in major U.S. shale plays like the Bakken Shale, Delaware Basin, Powder River Basin, Marcellus Shale and others. The company is least exposed to commodity price fluctuations since it generates stable fee-based revenues from diverse midstream energy assets via long-term contracts.
EQT Corporation (EQT): Free Stock Analysis Report
CVR Energy Inc. (CVI): Free Stock Analysis Report
Evolution Petroleum Corporation, Inc. (EPM): Free Stock Analysis Report
Crestwood Equity Partners LP (CEQP): Free Stock Analysis Report
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