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New report backs Rice team in EQT board battle

Rice brothers hold 3.1% stake in company and have nominated seven board candidates

Proxy advisory firm Institutional Shareholder Services delivered a blow to US shale gas giant EQT on Friday after issuing a report 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 read.

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"When viewed in totality, these shortcomings speak not only to concerns with operational abilities, but to an ineffective communication strategy with shareholders. The [Rice Team] has made a compelling case that substantial change at the board level is required."

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

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

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The report was quickly criticised by the EQT board, which said it disagreed with the report that includes Toby’s "false claims" about the business and a campaign run on "stale arguments." The company reiterated that the Rice team list of candidates is "significantly less qualified, less experienced and highly conflicted."

"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, especially since it did not see how Toby would bring "a differentiated skillset or shareholder voice" than his brother Daniel.

Shareholders are set to vote on candidates at an annual 10 July meeting.

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