April 5, 2021
A group of investors have asked a Pennsylvania federal court to certify their class in a suit over the $6.7 billion merger between EQT Corp. and Rice Energy, which they say lost them millions as a result of misrepresentations.
Investors including lead plaintiffs Government of Guam Retirement Fund and Northeast Carpenters Pension Fund, asked Friday that the court certify a class of “many thousands” of EQT and Rice shareholders who they say lost millions because the company and its executives allegedly misrepresented the viability and successes of the merger, which was supposed to save the company billions through synergies that ended up not panning out.
The proposed class wants Bernstein Litowitz Berger & Grossmann LLP and Cohen Milstein Sellers & Toll PLLC appointed class counsel.
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In the suit, the natural gas producer’s investors claim that EQT misled them about anticipated operating efficiencies and cost reductions that ultimately failed to materialize after its $6.7 billion merger in 2017. In particular, the shareholders alleged that EQT said it would be able to achieve savings by drastically increasing its drilling locations even though the company knew there was insufficient undrilled space to do so.
The suit was filed by the shareholders in June 2019, alleging that EQT had promised that the merger would bring $2.5 billion in synergies and save the company $100 million in 2018. They said those statements were made to them via investor calls, press releases and regulatory filings. The company had said that combining oil and gas leases with Rice Energy would create large, contiguous areas for drilling longer horizontal gas wells in the Marcellus Shale, according to the suit.
After the merger, however, the investors said that the leases weren’t as close together as promised and said the company’s costs went up after the merger. Overall, the cost of drilling in the third quarter of 2018 increased $300 million, the investors said. In addition, a 13% stock drop “eras[ed] nearly $700 million in shareholder value in a single day,” the investors said.
Particularly notable was an October 2018 earnings report cited in the suit, which led to a proxy fight between EQT and Rice Energy’s founders, who challenged the company’s post-merger strategy. The Rice founders won the battle in July 2019, when shareholders voted to give control of the company to brothers Toby and Derek Rice.
After the suit was filed, the defendants moved to kill the suit in January 2020, arguing that investors behind the suit are attempting to “convert their disappointment” with the company’s post-merger performance into securities fraud. The company said that it was indeed possible for it to drill as many new wells as it had promised, and that its statements were thus not misleading.
But U.S. District Judge Robert J. Colville said in December that the amount of acreage possessed by EQT and Rice and the amount of available, undrilled acreage that could be used were “knowable, quantifiable facts at the time defendants and their representations” and kept the case alive.
The investors are represented by M. Janet Burkardt and Jocelyn P. Kramer of Weiss Burkardt Kramer LLC, Salvatore J. Graziano, Adam H. Wierzbowski, Jai K. Chandrasekhar and Jesse L. Jensen of Bernstein Litowitz Berger & Grossmann LLP and Steven J. Toll, S. Douglas Bunch, Susan G. Taylor, Megan K. Kistler, Christina D. Saler, Benjamin F. Jackson and Jessica Kim of Cohen Milstein Sellers & Toll PLLC.
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