Item 2.01.
Completion of Acquisition or Disposition of Assets.
On February 22, 2019, EQM Midstream Partners, LP, a Delaware limited partnership (EQM), completed its previously announced simplification transaction pursuant to that certain Agreement and Plan of Merger, dated as of February 13, 2019 (the IDR Merger Agreement), by and among EQM, Equitrans Midstream Corporation, a Pennsylvania corporation (ETRN), EQM Midstream Services, LLC, a Delaware limited liability company and the former general partner of EQM (the Former EQM General Partner), EQGP Holdings, LP, a Delaware limited partnership (EQGP), EQGP Services, LLC, a Delaware limited liability company and the new general partner of EQM (the New EQM General Partner), Equitrans Merger Sub, LP, a Delaware limited partnership (Merger Sub), and certain other parties thereto. Pursuant to the IDR Merger Agreement, on February 22, 2019, (i) Merger Sub merged with and into EQGP (the Merger) with EQGP continuing as the surviving limited partnership and a wholly owned subsidiary of EQM following the Merger, and (ii) each of (a) the incentive distribution rights in EQM (the IDRs), (b) the economic portion of the general partner interest in EQM and (c) the issued and outstanding common units representing limited partner interests in EQGP were cancelled, and, as consideration for such cancellation, certain affiliates of ETRN received 80,000,000 newly-issued EQM common units and 7,000,000 newly-issued Class B units (Class B units), both representing limited partner interests in EQM, and the New EQM General Partner retained the non-economic general partner interest in EQM (the EQM IDR Transaction).
EQM is an indirect subsidiary of ETRN. As a result, the Board of Directors of the Former EQM General Partner established a Conflicts Committee (the Conflicts Committee) to review, evaluate and negotiate the EQM IDR Transaction for and on behalf of EQM, its subsidiaries and its public unitholders. The Conflicts Committee, by unanimous vote, determined that the EQM IDR Transaction is in the best interests of EQM and its subsidiaries and its public unitholders, approved the EQM IDR Transaction, and recommended to the Board of Directors of the Former EQM General Partner approval of the EQM IDR Transaction.
At the effective time of the EQM IDR Transaction, the 21,811,643 EQM common units held by EQGP were cancelled and 21,811,643 EQM common units were issued pro rata to the holders of EQGP common units. As a result of the EQM IDR Transaction, (i) the New EQM General Partner replaced the Former EQM General Partner as the general partner of EQM and (ii) the IDRs and economic general partner interest in EQM were cancelled and are no longer outstanding.
The Class B units are divided into three tranches, with the first tranche of 2,500,000 Class B units becoming convertible at the holders option into EQM common units on April 1, 2021, the second tranche of 2,500,000 Class B units becoming convertible at the holders option into EQM common units on April 1, 2022, and the third tranche of 2,000,000 Class B units becoming convertible at the holders option into EQM common units on April 1, 2023 (each, a Class B unit conversion date). Additionally, the Class B units will become convertible at the holders option into EQM common units immediately before a Change of Control (as defined in the Amended and Restated EQM Partnership Agreement (as defined below)) of EQM. Until the applicable Class B unit conversion date (or, if earlier, a Change of Control), the Class B units will not be entitled to receive any distributions of available cash. After the applicable Class B unit conversion date (or, if earlier, a Change of Control), whether or not such Class B units have been converted into EQM common units, the Class B units will participate pro rata with the EQM common units in distributions of available cash.
As of February 22, 2019, and following the EQM IDR Transaction, EQM owns, directly or indirectly, 100% of the limited partner interests and all of the non-economic general partner interest in EQGP, and ETRN indirectly owns 117,245,455 EQM common units and all 7,000,000 Class B units, collectively representing a 59.9% limited partner interest in EQM.
The summary of the EQM IDR Transaction set forth above does not purport to be complete and is qualified by reference to the full text of the IDR Merger Agreement, a copy of which is filed as Exhibit 2.1 to EQMs Current Report on Form 8-K filed with the Securities and Exchange Commission on February 14, 2019 and is incorporated herein by reference, and the Amended and Restated EQM Partnership Agreement, a copy of which is filed as Exhibit 3.2 to this Current Report on Form 8-K and is incorporated herein by reference.
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