The Federal Trade Commission responded to antitrust concerns surrounding a $5.2 billion cash-and-stock deal between Quantum Energy Partners, a private equity firm, and EQT Corporation, a natural gas producer. The FTC has taken measures to stop an interlocking directorate arrangement and the potential exchange of anticompetitive information, 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,” FTC Bureau of Competition Acting Deputy Director Nathan Soderstrom said 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.”
The FTC's resolution involves the approval of a consent order, designed to prevent entanglements between the two entities and the sharing of confidential, competitively sensitive information. Quantum and EQT are direct rivals in the production and sale of natural gas within the Appalachian Basin, the largest natural gas-producing region in the U.S., the release reported.
This deal would result in Quantum becoming a major shareholder of EQT, leading to Quantum's presence on EQT's board of directors. However, this scenario violates antitrust regulations and potentially harms competition within the industry, according to the release.
The FTC's consent order introduces significant structural changes that address the situation. The order prohibits Quantum from holding a position on EQT's board throughout its duration and prevents the entanglement of the top seven Appalachian Basin natural gas producers, which constitute a significant portion of the market, the release said.
The order mandates Quantum sells its EQT shares by a specified date and requires that these shares, while owned by Quantum, are held within a voting trust overseen by a trustee acting proportionally to other EQT shareholders, the release reported. Furthermore, the order necessitates the dissolution of an existing joint venture named the Mineral Company, an initiative between EQT and Quantum focused on purchasing mineral rights within the Appalachian Basin.
To ensure the effectiveness of the consent order, the FTC imposes additional requirements. These include restrictions on future interactions between EQT and Quantum, with a prohibition on entering into noncompete agreements unrelated to the sale of business assets, according to the release.
Both entities are required to establish and maintain an antitrust compliance program, and the order introduces provisions designed to facilitate compliance monitoring, including the appointment of a compliance monitor. While the FTC has issued the consent agreement for public comment, its vote on the matter was unanimous and the FTC plans to publish the consent agreement package in the Federal Register, the release said.
The public will have the opportunity to provide comments, which will be reviewed and posted on Regulations.gov, the release reported.
