The U.S. Federal Trade Commission has taken action to address antitrust concerns related to a $5.2 billion cash-and-stock deal between Quantum Energy Partners, a private equity firm, and natural gas producer EQT Corporation. The agency secured unique structural solutions that safeguard competition within the natural gas market of the Appalachian Basin, particularly after the transaction led by private equity, according to an Aug. 16 news release.
“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. “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.”
The FTC approved a consent order to prevent any inappropriate interconnections between the two companies and the sharing of confidential and competitively sensitive information. Quantum Energy Partners and EQT are competitors in the natural gas production and sales sector within the Appalachian Basin, a significant region for natural gas production, the release reported.
The proposed acquisition would result in Quantum becoming a major EQT shareholder and gaining a board seat, contravening antitrust regulations and negatively impacting industry competition, according to the release.
The FTC's consent order enforces innovative structural remedies, ensuring Quantum refrains from obtaining a board seat at EQT, divests its EQT shares, refrains from anticompetitive information exchange and dismantles an anticompetitive joint venture between the two entities. This consent order marks the FTC's first utilization of Section 8 of the Clayton Act in four decades, which prohibits interlocking directorates, wherein an individual from one firm concurrently holds a role in a competing firm, the release said.
The proposed deal involves EQT's acquisition of Quantum Energy's subsidiaries, including Tug Hill, the 11th largest Appalachian Basin natural gas producer. In exchange, Quantum would acquire up to 55 million EQT shares, becoming a substantial shareholder and obtaining a board seat, the release reported.
Furthermore, the proposed acquisition would provide Quantum with the means to influence EQT's decision-making, access sensitive information and potentially manipulate competitive actions. The FTC also addresses concerns regarding a pre-existing joint venture named The Mineral Company between EQT and Quantum, which raises worries about anticompetitive information sharing and its detrimental impact on mineral rights acquisition in the Appalachian Basin, the release said.
The proposed consent order by the FTC not only resolves the antitrust concerns, but also establishes a precedent regarding the application of key acts and the use of structural remedies to counteract these issues, according to the release. The consent order stipulates various provisions, including the prohibition of Quantum's board involvement at EQT, the divestment of EQT shares, restrictions on future entanglements and the establishment of antitrust compliance programs.
