DealLawyers.com Blog

This Wachtell memo discusses the recent proxy contest over the merger of EQT Corporation & Rice Energy – which involved efforts by Jana Partners & other activist hedge funds to derail the transaction – and shares the lessons that can be learned from that fight about how to respond to “deal activism.”

The memo covers a number of topics, including the importance of broad shareholder engagement efforts, & the need to focus on the long-term investor and the company’s value creation strategy. This excerpt addresses the need to stay “on message” throughout the process:

In all deals, but especially those subject to activist challenge, a strong rollout, and staying on message throughout the process, is critical. In the course of an activist assault it is often difficult not to be distracted by the wide variety of criticisms the activists may raise, and the wide variety of “experts” whose presentations often oversimplify the many complicated and subtle judgments involved. In this often chaotic context, it is critical to maintain focus on the benefits of the deal and the credibility of the board and management. EQT introduced the transaction with a detailed investor presentation and conference call.

In the face of a barrage of disparagement by activists, much of it ad hominem, EQT maintained its composure and continued to focus the market on the deal. EQT’s Board also wisely made real, public commitments to underscore the strength of its focus on the interests of shareholders and its intention to address valuation issues. The ISS and Glass-Lewis recommendations are still important, and the Lead Independent Director and CEO personally and effectively presenting to those firms were key factors in EQT’s success in obtaining their recommendations. The merger’s opponents also made presentations, but ultimately failed to persuade the proxy advisory firms, and then withdrew the challenge shortly following the advisory firms’ recommendations in favor of the deal.

– John Jenkins