EQT Acquires Equitrans Midstream in $5.5 Billion Deal

Key Takeaways:

• EQT will pay approximately $5.5 billion for midstream natural gas infrastructure provider Equitrans Midstream, its former unit, as it expands its reach into the natural gas sector.
• The acquisition gives Equitrans investors 0.3504 share of EQT stock for every share they hold.
• EQT said the deal creates “America’s first large-scale integrated natural gas producer.”
• EQT was the worst-performing stock in the S&P 500 on Monday, down 8.2% in early-afternoon trading.

EQT Corp. was the worst-performing stock in the S&P 500 midday Monday after the natural gas producer announced it was buying midstream infrastructure provider Equitrans Midstream Corp. for approximately $5.5 billion.

EQT explained that the deal gives Equitrans investors 0.3504 share of EQT stock for every share of Equitrans they own. It added that this equaled an implied value of $12.50 per share based on the volume-weighted average of Equitrans stock for 30 days ending on Friday. Equitrans shares closed then at $11.15, while EQT shares finished at $37.52.

EQT said the merger creates “America’s first large-scale, integrated natural gas producer.” CEO Toby Rice called it “the most strategic and transformational transaction” ever pursued by the company. He noted that EQT sees the acquisition as “a once in a lifetime opportunity to vertically integrate one of the highest quality natural gas resource bases anywhere in the world.” The combined company is expected to be valued at more than $35 billion.

EQT previously owned Equitrans, but spun it off in 2018 after being pressured to do so by activist investor Jana Partners.

The companies anticipate the transaction will close in the fourth quarter.

Shares of Equitrans Midstream pared early gains and were up 2.4% as of 12:20 p.m. ET Monday, but were still trading near their best levels in more than two years. EQT shares were down 8.2% to $34.45 and have lost more than 10% so far in 2024.

Implications of the Acquisition

The acquisition of Equitrans Midstream by EQT represents a significant move in the natural gas sector. By integrating midstream infrastructure into its operations, EQT aims to streamline its production and distribution processes, creating a more efficient and cost-effective operation.

With the combined company expected to be valued at over $35 billion, this deal solidifies EQT’s position as a major player in the natural gas industry. The vertical integration of its operations allows EQT to control more aspects of its supply chain, potentially leading to increased profitability and market competitiveness.

Market Response

Despite the positive outlook for the combined company, market response to the acquisition has been mixed. While Equitrans Midstream saw a modest increase in its stock price following the announcement, EQT experienced a significant drop in its share value.

Investors may be concerned about the financial implications of the deal and how it will impact EQT’s future performance. The company’s stock price may continue to fluctuate as investors assess the long-term benefits and risks associated with the acquisition.

Conclusion

The acquisition of Equitrans Midstream by EQT represents a strategic move to expand its presence in the natural gas sector. By creating America’s first large-scale integrated natural gas producer, EQT aims to capitalize on synergies between production and distribution operations.

While the market response has been mixed, the long-term implications of this deal could position EQT as a key player in the industry. As the transaction moves towards closing in the fourth quarter, investors will be closely watching to see how this acquisition impacts EQT’s performance and market position.

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