By Greg Roumeliotis and David French
(Reuters) - EQT Corp's board of directors will ask to meet Toby and Derek Rice for talks, people familiar with the matter said on Sunday, after the two brothers threatened the largest producer of natural gas in the United States with a board challenge.
The Rice family sold its company Rice Energy Inc to EQT for $6.7 billion in cash and stock last year. It now owns about 2.75 percent of EQT, and Toby and Derek Rice wrote a letter last week to EQT's board asking for a "course correction".
The brothers have also warned EQT that they will nominate their own directors to its board at its next annual shareholder meeting in 2019 if a "mutually agreeable outcome" is not reached.
EQT Chairman Jim Rohr and Chief Executive Rob McNally plan to write to the Rice brothers to ask them to discuss their plans for the company in more detail with the board, the sources said, asking not to be identified because the matter is confidential.
EQT declined to comment, while a spokesman for the Rice brothers did not immediately respond to a request for comment.
The Rice brothers said in their letter last week that they had previously engaged in private discussions with Rohr and McNally to discuss their proposals, which included "inserting Toby Rice into the organization with proper authority and support to oversee operations."
They said they were going public with their demands because of what they called EQT's lack of reciprocal engagement, as well as its pushing forward with establishing its 2019 operational plan.
It is not clear how the Rice brothers will respond to EQT's offer, and what outcome any new talks may produce.
EQT shares have lost more than 45 percent of their value since the company's acquisition of Rice Energy in November 2017, much worse than the 8 percent decline in the broader S&P 500 Energy index in the same period.
The Rice brothers have said they have a "proven, detailed business plan" to generate an incremental $400 million to $600 million of pre-tax free cash flow per year above EQT's current plans, resulting in more than $1 billion of free cash flow annually.
EQT, which has a market capitalization of $4.9 billion, is focused on the acquisition, exploration and development of natural gas and oil properties in the Appalachian Basin. It has operations throughout Pennsylvania, West Virginia and Ohio.