Another day, another episode of the ongoing soap opera that is the power struggle to retain (or take over) control of the country’s largest natural gas producer: EQT. Yesterday we told you about current CEO Rob McNally’s bold and gutsy move in adopting a “universal proxy” and about going on offense with a scorching letter written to Toby Rice (see EQT Issues List of Board Nominees; Adopts Universal Proxy Card). Following EQT’s letter, Toby and brother Derek Rice issued a rebuttal letter of their own.
Here’s a few excerpts of Wednesday’s EQT letter to Toby Rice (emphasis added):
We have serious reservations regarding your Nominees, however. Because you operate Rice Investment Group (“RIG”), a firm that makes investments in gas companies and gas-company vendors, and has a history of investing in companies that have sold or would be positioned to sell products and services to EQT, we have concerns about potential conflicts of interest and your independence and that of your Nominees. The fact that you personally reached out to company executives to try to persuade them to do business with RIG portfolio companies has informed the Board’s view on this issue. Additionally, a number of your other Nominees have a long history of friendship and service to the Rice family, and more than one have relatives who were employed by Rice Energy or its related companies and investors. The Rice family and many of your Nominees have significant investment businesses in energy that could conflict with EQT’s interests. We have carefully considered the composition of EQT’s Board so that it advances the Company’s interests and those of its shareholders. The Board should not be a friends-and-family club, and it is not in the best interests of all EQT shareholders for the Company to become a family business. Particularly given your family’s 3.1% ownership interest in EQT, and your brother’s position as a director on the EQT Board standing for reelection, we do not believe the addition of other Rice family members or their designees is appropriate or consistent with best-in-class governance practices. (1)
Ouch. The EQT letter then went on to say not only are the Rice board picks all cronies of the Rice brothers, they aren’t “skilled enough” (i.e. smart enough) to be board members. And oh, your brother Danny Rice, an existing EQT board member, is more than enough Rice brothers for the this board:
Moreover, in addition to your Nominees not being sufficiently independent, we do not believe that the skill set of your Nominees is comparable to the depth, breadth and experience of the director candidates nominated by EQT. The Board believes that Danny brings relevant experience with regard to Rice Energy’s legacy assets as well as a former public company CEO’s perspective to the EQT boardroom. However, we fail to see why the Company needs two brothers with similar backgrounds and experience when we could benefit, by contrast, from directors with a variety of direct, large-company experience, as offered by the EQT nominees. (1)
Ba boom. The gloves are fully off. This is now MMA. One will be standing when it’s over, the other will not.
EQT’s letter was sent two days ago. Yesterday Toby and brother Derek responded by congratulating EQT on tossing three “value destroying” board members (ouch), then added EQT’s board changes are too little too late. The real problem at EQT, according to the Rice boys, is lack of “vision, ambition and execution capability.” Zing!
Here’s the Rice boys’ response from yesterday (emphasis added):
Toby Z. Rice and Derek A. Rice (the Rice Team), shareholders of EQT Corporation (NYSE: EQT), today issued the following statement in response to the public letter sent by certain members of EQT’s Board of Directors.
“We are pleased that three long-serving directors who have overseen significant value destruction at EQT will be stepping down. It is disappointing to us that it took substantial time and effort on our part to prompt this positive change. However, we do not believe this reactionary move by the Board is sufficient to achieve the fundamental changes needed at EQT.
As we and other shareholders have been saying for many months, the problem at EQT is that the leadership team lacks the vision, ambition and execution capability to deliver on the promise of EQT’s outstanding assets. Modest Board changes without a leadership team change will not, in our view, put EQT on a path to unlock the true potential of its asset base. The reality is that even if EQT achieves management’s stated 2019 targets, it would remain the highest-cost operator in the Appalachian Basin.
As major shareholders and proven operators, the Rice Team stands ready to deliver on EQT’s stated January 2019 plan plus an incremental $500 million of free cash flow annually. Our track record speaks for itself. We look forward to engaging with our fellow shareholders and describing our operating plan and experience.
We are also disappointed that members of EQT’s Board have disingenuously claimed our campaign is an attempt to further our family’s interests. The Board knows that the Rice Team began this campaign only after several of EQT’s largest shareholders reached out to us, expressing their disappointment with the Company’s performance. The Rice Team has nominated directors and will solicit support because all shareholders deserve a proven management team that can deliver results that reflect the potential of EQT’s world class assets.” (2)
What will Monday’s episode bring? We can hardly wait to find out!
(1) EQT Corporation (May 8, 2019) – EQT Nominates Janet L. Carrig, James T. McManus II, and Valerie A. Mitchell to Board of Directors
(2) Team Rice/Businesswire (May 9, 2019) – Rice Team Responds to Letter from EQT Board
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