Activist investor Jana Partners disclosed a 5.8 percent stake in EQT Corp (EQT.N) on Monday and urged the company to abandon its proposed acquisition of Rice Energy (RICE.N).
Instead of buying Rice Energy, EQT should fully separate its pipeline operations into a publicly traded company and change its board structure, Jana said in a regulatory filing.
EQT's shares were up about 1 percent at $59.14, while those of Rice Energy fell 5.5 percent to $25.17.
EQT said in June it would buy Rice Energy, a fellow Appalachian gas and oil firm, for $6.7 billion to become the largest U.S. natural gas producer.
The company's biggest-ever deal comes at a time when U.S. natural gas prices have been suppressed by abundant supply, forcing companies to seek out ways to control production costs.
EQT has identified $2.5 billion of cost savings from the proposed merger, as well as benefits from moving some of Rice Energy's midstream assets into its pipeline business, EQT Midstream Partners (EQM.N).
The Wall Street Journal reported Jana's plans earlier in the day. The hedge fund had been buying EQT shares before the deal and was blindsided by the announcement, sources told the Journal.
Jana, which becomes EQT's fourth-largest shareholder with the stake purchase, has returned 1.2 percent in June and is now up 5.8 percent for the first six months of 2017.
Based on EQT's Friday closing price, Jana's stake is worth about $590 million.
EQT and Rice Energy were not immediately available for comment.