EQT Corp. (NYSE:EQT) has agreed to a $5.5 billion acquisition of Equitrans Midstream (NYSE:ETRN), its former subsidiary, aiming to establish a major vertically integrated natural gas company, the companies announced on Monday.
ETRN shares popped nearly 9% in premarket trading Monday following the report, while EQT stock fell 3%.
The merger, first reported by the Wall Street Journal, is anticipated to create a combined entity valued at over $35 billion, including debt. This consolidation seeks to leverage control over both the production and transportation segments of natural gas, utilizing over 2,000 miles of pipeline infrastructure.
The companies said that the symbiotic nature of their assets is projected to drive annual synergies of $250 million.
"Equitrans is the most strategic and transformational transaction EQT has ever pursued, and we see this as a once in a lifetime opportunity to vertically integrate one of the highest quality natural gas resource bases anywhere in the world," said EQT President and CEO Toby Z. Rice.
A significant part of this strategy includes Equitrans's involvement in the Mountain Valley Pipeline project, which despite delays and opposition, is slated for completion in Q2 2024, costing between $7.57 and $7.63 billion.
Analysts have previously noted that the nearing completion of this project might have made Equitrans a more attractive acquisition target. Earlier this year, Equitrans had begun exploring potential deals after receiving interest from various parties.
In this all-stock deal, Equitrans shareholders will receive 0.3504 shares of EQT for each share they own, equating to $12.50 per Equitrans share. ETRN closed at $11.15 Friday, while EQT had a market valuation of about $16.5 billion.
Post-merger, EQT's current shareholders will hold about 74% of the merged company, with Equitrans shareholders owning the remainder.
The deal will see three Equitrans representatives joining EQT's board, with the unified company's headquarters remaining in Pittsburgh.