EQT Corp. announced May 6 plans to acquire all membership interests in the upstream and midstream subsidiaries of a Houston-based driller.
The assets of privately held Alta Resources, which counted the late George Mitchell as a longtime partner, will change hands for $2.925 billion in a cash and common stock combination, pending the close of the transaction.
The purchase agreement is on-trend as consolidation and strategic asset acquisitions continue to roll in 2021.
Deputy general counsel Ashley Yates and general counsel Will Jordan led the deal in-house at EQT, the country’s largest gas producer.
The Pittsburgh company turned to Latham & Watkins for legal counsel and BofA Securities for financial counsel in the deal that would see the public entity make another significant foray into the core of the Northeast Marcellus Shale after its bolt-on purchase of Chevron’s Appalachia assets late last year.
Brad Hutchinson led the BofA team, while Houston corporate partners Chris Bennett and John Greer led the deal for Latham along with associates Greg Sorensen, Rebecca Kendall and Erin Lee and partner Jeff Muñoz, all of Houston.
Latham partner Jim Cole and associate Emily Fawcett, both of Houston, provided counsel on tax matters; Washington, D.C. partner Adam Kestenbaum advised on employee benefits matters by; Washington, D.C. counsel Peter Todaro worked on antitrust matters; partner Drew Levin and associate Harrison White, both of Los Angeles, counseled on insurance matters.
Citi Global Markets Inc. – with a team that included Chris Miller, Claudio Sauer and James Jackson – advised on financial matters and Kirkland & Ellis acted as legal advisor to Alta.
Corporate partners Andy Calder of Houston, John Pitts Houston and Melissa Kalka of Dallas and associates Paul Knowlton of Houston, Michael Bassi of Houston, Tess Dennis of Dallas and Austin Johnson of Houston led the Kirkland team, in addition to real asset partners Anthony Speier and Chad Smith and associates Lindsey Jaquillard and Isaac Bate, all of Houston; capital markets partner Julian Seiguer and Ieuan Adrian List, both of Houston; debt finance partners Lucas Spivey and Jordan Roberts, both of Houston, and associate Layton Bell of Dallas; tax partner David Wheat of Houston and Dallas and associate Joe Tobias of Houston; environmental transactions partner Stefanie Gitler of Washington, D.C., and Houston and James Dolphin of Houston; derivatives partner Drue Santora of New York; executive compensation partner Rob Fowler of Houston and associate Katherine Baker of New York; labor & employment partner R.D. Kohut and associates Jaclyn Schruhl and Colleen Angus-Yamada, all of New York; employee benefits partner Maureen O’Brien and of counsel Patrick Ryan, both of Chicago; energy regulatory partner Brooksany Barrowes of Washington, D.C., and associate Cassidy Hall of Dallas; and antitrust & competition partner Marin Boney and of counsel Ellen Jakovic, both of Washginton, D.C.
General counsel Lauren Ford led the transaction internally at Alta.
Upon close of the deal, Alta shareholders will receive $1 billion in cash and $1.925 billion in EQT common stock based on the 30-day volume-weighted average price as of May 5 in exchange for 300,000 acres in the Marcellus, in addition to gathering systems and freshwater system, among other offerings. The pricetag represents more than five times EBITDA, according to an analyst note from Simmons Energy, a division of Piper Sandler.
For cash, EQT plans potentially to look to cash on hand, its revolving credit facility and “one or more” debt capital markets transactions. EQT has access to $1.4 billion through its unsecured credit facility.
Jointly, Bank of America and JPMorgan Chase also provided $1 billion in committed financing for the transaction.
Simmons Energy analyst Kashy Harrison noted that while well performance looks attractive based on 2020 data and benefits from a low royalty position, the asset for EQT “does not fit hand-in-glove (i.e. CVX deal), effectively amounts to a new operating area for EQT, and possesses meaningful non-op exposure.”
Early market sentiments show investors responding unfavorably to the transaction with EQT shares trading down more than 8% in midday trading.
Reports first circulated in February and March that Alta, which received significant backing from Blackstone in 2011 and picked up about 195,000 Marcellus acres from Anadarko for $1.24 billion in 2016, was shopping the assets.
The EQT-Alta exchange follows what many dealmakers continue to see from upstream and midstream clients: companies are searching for strategic asset acquisitions that will produce meaningful gains for shareholders – beyond simply growing for the sake of it.
The transaction is expected to close in the third quarter with an effective date of Jan. 1, 2021.