After EQT Corp. (EQT, Financial) announced its plans to acquire Rice Energy Inc. (RICE, Financial) on June 19, hedge fund Jana Partners (Trades, Portfolio) took a nearly 5% stake in the energy company in an attempt to derail the $6.7 billion deal.
According to The Wall Street Journal, the activist hedge fund had been buying EQT stock before the announcement and was blindsided.
In response, the fund purchased 8.14 million shares for an average price of $56.19 per share on June 23, pushing NWQ Managers (Trades, Portfolio) out of being the company’s largest guru shareholder.
Rather than acquiring Rice, a securities filing reports the fund wants EQT to fully separate its pipeline operations to become a pure-play exploration and production company. While that could still happen, the acquisition could delay the process by several years due to tax rules. In addition, Jana believes the price is too high and questions the benefits.
In a statement released at the time of the announcement, EQT President and CEO Steve Schlotterbeck said the deal “will provide substantial synergies and make this transaction significantly accretive in the first year.” The combined company would be the largest natural gas producer in the U.S. by volume.
In regard to the suggestion of splitting its pipeline and exploration operations, EQT acknowledged the market is missing value between its businesses and said management will evaluate the options and develop a plan to deal with this discount by the end of 2018.
On Friday, EQT’s stock price was up nearly 2% at $59.75 with a forward price-earnings (P/E) ratio of 38.6, a price-book (P/B) ratio of 1.7 and a price-sales (P/S) ratio of 5.3. Rice Energy closed at $25.66 on Monday, down 3.6% from the previous trading day, with a forward P/E ratio of 81.3, a P/B ratio of 1.8 and a P/S ratio of 4.6.
Disclosure: I do not own any stocks mentioned in the article.
