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Proxy firms split over slate for board candidates in EQT-Rice spat

Two proxy advisory firms have delivered separate recommendations on what slate of candidates would be best suited to run US shale gas giant EQT as a battle for board control rages on between the company and former Rice Energy executives ahead of a crucial shareholder vote on 10 July, writes Julia Martinez.

Proxy advisory firm Institutional Shareholder Services (ISS) first issued a report on 28 June favouring candidates put forth by the Toby Rice Group in a battle for board control.

"The [Rice Team] raises several other valid points, including that EQT has failed to fully achieve the Rice transaction synergies communicated to the market prior to the deal, that management's guidance relies on unsupported future gas price assumptions that are more bullish than futures contract prices, that the CEO was promoted from the CFO role despite overseeing a disastrous $500 million share repurchase program during the disappointing Q3 2018, and that EQT's cost cutting initiatives are simultaneously vague and unambitious," the ISS report claimed.

"The [Rice Team] has made a compelling case that substantial change at the board level is required," it argued.

The Rice team, led by brothers Toby and Derek Rice, has been going head-to-head with the EQT board since last year following what they have called unsatisfactory results after a $6.7 billion merger with Rice Energy in 2017.

The Rice team has put forth seven candidates for the 12-person board, which includes retaining their brother Daniel, who was previously Rice Energy chief executive. The brothers collectively hold 3.1% of EQT.

As part of the Rice team plan, Toby would be appointed chief executive, a move EQT has consistently said would be destructive for the company.

EQT's board responded saying it disagreed with a report that includes Toby’s "false claims" about the business and a campaign run on "stale arguments."

"Like Toby Rice's 'friends and family slate,' it seems that ISS decided to support Toby Rice based on false information published by the Toby Rice Group and without thoughtfully evaluating the detrimental impact the election of the dissident nominees would have on the company’s operations," EQT said.

The Appalachia basin-focused producer added that it failed to see how electing a second member of the Rice family would maintain the board’s independence.

A 1 July report by proxy advisory firm Glass Lewis said: “We are not convinced the Rice Group plan offers a credible path to achieving material incremental savings above what EQT is already targeting.”

The firm said it did not believe further changes were warranted given the board already has a new slate of executives and eight new directors.

“Having reviewed the arguments presented by both sides in this proxy fight, we find that the newly appointed board and executive team at EQT are taking appropriate steps to oversee the company and we believe management should be provided with additional deference and a reasonable amount of time to execute the current strategic plan and deliver on targets communicated to investors.”

Shareholders are set to vote on board candidates at the 10 July meeting.

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