Proposed combination would result in PHX
stockholders owning majority of the pro forma equity in
newly-formed, publicly traded, WhiteHawk Minerals Corporation and
receiving a one-time $0.20 per share cash dividend
Proposed combination provides PHX stockholders
with an ability to participate in enhanced scale and additional
mineral and royalty assets in the core of the Haynesville Shale and
Marcellus Shale
Encourages the PHX board of directors to engage
in good-faith discussions regarding the proposed value-maximizing
transaction following unwillingness to date
An affiliate of WhiteHawk Energy, LLC (“WhiteHawk”), an
independent energy minerals and royalties company, today sent a
letter to Mark Behrman, the Chairman of PHX Minerals, Inc.’s
(“PHX”) board of directors, copied in full below, with respect to
its proposal to combine with PHX in a stock-for-stock transaction
to form a publicly traded corporation, WhiteHawk Minerals
Corporation.
Under the terms of the proposal, first made privately to PHX in
a May 31, 2023 letter and revised by WhiteHawk in a June 20, 2023
letter, PHX stockholders would own approximately 61%1 of the pro
forma equity of WhiteHawk Minerals Corporation and receive a
one-time $0.20 per share cash dividend.
The non-binding offer was reiterated in a letter sent today to
Mr. Behrman, after several unsuccessful attempts to engage PHX’s
board of directors and management in productive discussions.
WhiteHawk is disclosing the contents of its letter in order to
inform PHX stockholders of the potential opportunity to combine the
two companies.
As detailed in the proposal, WhiteHawk believes a combination of
the two companies will result in the following benefits to PHX
stockholders:
- An enhanced pro forma asset base with WhiteHawk’s 850,000 gross
unit acres in the Marcellus and the Haynesville shales, two of the
most prolific natural gas basins in the U.S.;
- G&A synergies of approximately $4 million per year;
- An increased stockholder payout ratio to 50% to 60% of
distributable cash flow, which will increase the dividend by over
100%;
- Immediate accretion to PHX’s distributable cash flow per
share;
- Accelerated conversion to an increased weighting in mineral and
royalty assets;
- A larger company with a more liquid stock; and
- A combined company to be led by the WhiteHawk management team,
which has run publicly-traded mineral and royalty, upstream, and
midstream companies totaling over $13 billion in enterprise
value.
“While we have been disappointed with the engagement to date, we
believe today marks a new beginning of the discussions between
WhiteHawk and PHX Minerals,” said Daniel C. Herz, WhiteHawk’s
Chairman and Chief Executive Officer. “PHX stockholders deserve the
opportunity to consider and communicate directly with the company
regarding their views of the substantial benefits of our
proposal.”
The full text of WhiteHawk’s August 9, 2023 letter is included
below.
Advisors
Weil, Gotshal & Manges LLP is serving as WhiteHawk’s legal
advisor.
WhiteHawk’s August 9, 2023 Letter to
PHX
August 9, 2023
PHX Minerals, Inc. Board of Directors c/o Mark Behrman, Chairman
of the Board of Directors 1320 South University Drive Suite 720
Fort Worth, Texas 76107
Dear Mr. Behrman,
We are once again writing to reiterate an affiliate of WhiteHawk
Energy, LLC’s (“WhiteHawk”) proposal to acquire PHX Minerals, Inc.
(“PHX”) common stock in a stock-for-stock transaction to form a
publicly traded corporation, WhiteHawk Minerals Corporation
(“WhiteHawk Minerals”), pursuant to which PHX stockholders would
own approximately 61%2 of the pro forma equity of WhiteHawk
Minerals and would receive a one-time $0.20 per share cash dividend
(the “Proposal”).
As previously noted, this Proposal would provide the following
benefits to PHX’s investors: (i) an enhanced pro forma asset base
with WhiteHawk’s 850,000 gross unit acres in the Marcellus and the
Haynesville shales, two of the most prolific natural gas basins in
the U.S.; (ii) G&A synergies of approximately $4 million per
year; (iii) an increased stockholder payout ratio to 50% to 60% of
distributable cash flow, which will increase the dividend by over
100%; (iv) immediate accretion to PHX’s distributable cash flow per
share; (v) accelerated conversion to an increased weighting in
mineral and royalty assets; (vi) a larger company with a more
liquid stock; and (vii) a combined company to be led by the
WhiteHawk management team, which has run publicly-traded mineral
and royalty, upstream, and midstream companies totaling over $13
billion in enterprise value.
We continue to believe that PHX stockholders stand to benefit
from WhiteHawk’s best-in-class natural gas mineral and royalty
assets and a significant improvement to PHX’s operations and
strategy resulting in increased stockholder returns, all while such
stockholders would retain a majority interest in WhiteHawk
Minerals. More specifically, in addition to the one-time $0.20 per
share cash dividend, we also plan to increase the dividend by over
100%, while maintaining a conservative payout ratio of 50-60%,
which is below other public mineral and royalty companies, while
reducing G&A by approximately 40% under our leadership.
Following this transaction, your stockholders would own a combined
business with a diversified platform that would be well-positioned
for enhanced scale and additional mineral and royalty assets in the
core of the Haynesville Shale and Marcellus Shale while utilizing
WhiteHawk’s vast resources and expertise of growing public
companies to deliver outstanding investor returns.
We have made numerous attempts to engage in a constructive
private dialogue with PHX’s executive officers and the PHX board of
directors over the past 3 months. From May 3, 2023 through May 26,
2023, we privately reached out numerous times to PHX’s CEO and CFO,
Chad Stephens and Ralph D’Amico, in an attempt to privately explore
a potential transaction that would provide meaningful value to PHX
stockholders. Our attempts were ignored and rebuffed. Finally, on
May 31, 2023, we sent a formal written proposal (the “Initial
Proposal”). Instead of meaningfully engaging with us, you sent a
letter on June 12, 2023 (the “June 12 Letter”) asserting that the
Initial Proposal was “grossly inadequate” despite also stating that
PHX was not “provide[d] sufficient information” to analyze the key
aspects of the Initial Proposal. These contradictions raise
questions as to how seriously the PHX board of directors took their
duty to review and consider the Initial Proposal and to act on an
informed basis. Further, you failed to provide any avenue for
further discussion that would allow us to address your reasons for
such a conclusion, despite our expressed willingness to provide any
additional information necessary for the PHX board of directors to
make a fully informed decision on the Initial Proposal.
On June 20, 2023, we sent an updated proposal (the “Revised
Proposal”) in response to the June 12 Letter addressing your
expressed concerns, stating our willingness to provide diligence
materials via a virtual data room and offering to set up an
in-person meeting to discuss the Revised Proposal and answer any
diligence questions the PHX board of directors may have in order to
enable the PHX board of directors to make a fully informed decision
on the Revised Proposal. Over five weeks later, without ever
engaging in a meaningful dialogue with us regarding our assumptions
in the Revised Proposal, the assets we would provide or the Revised
Proposal as a whole, PHX’s Chairman and CEO contacted us and
advised us that PHX viewed the Revised Proposal as inadequate. The
PHX board of directors followed up that conversation with a letter
to us dated July 27, 2023, confirming in writing that the Revised
Proposal “remains inadequate in terms of the value offered to PHX
and its stockholders, involves assets that would not provide a
strategic benefit to PHX, and is not in the best interests of PHX
and its stockholders.”
No rationale was offered with regard to the connection between
PHX’s limited assessment of the diligence materials provided and
PHX’s decision to reject the Revised Proposal. Again, PHX never
engaged with us in a meaningful dialogue to fully understand and
discuss the Revised Proposal, despite our expressed willingness to
do so.
We firmly believe that your persistent unwillingness to engage
in discussions regarding this highly beneficial transaction is
contrary to the interests of PHX stockholders.
We would have preferred to work privately with you to reach an
agreement for the benefit of your stockholders – and attempted to
do so repeatedly – but given your refusal to engage meaningfully,
we believe making our Proposal public is now the only path forward.
Your stockholders deserve the opportunity to consider and
communicate directly with you regarding their views of the
substantial benefits of our Proposal.
Our leadership considers this transaction to be an important
strategic priority. We have engaged Weil, Gotshal & Manges LLP
to assist us in completing this transaction.
We stand ready to work with you immediately to move forward on
the basis of the Proposal. We strongly prefer to engage in direct
and constructive discussions to reach an agreement for the benefit
of PHX. We hope that your board of directors, your management and
your advisors are prepared to engage with us in the best interests
of your deserving stockholders.
Sincerely,
/s/ Daniel C. Herz
Daniel C. Herz Chairman and Chief Executive Officer WhiteHawk
Energy, LLC
* * * *
About WhiteHawk Energy
WhiteHawk Energy, LLC is focused on acquiring mineral and
royalty interests in top tier natural gas resource plays, including
the Haynesville and Marcellus Shales. The management team at
WhiteHawk Energy has successfully grown over $13 billion of
minerals, midstream, and exploration and development companies over
the last 20 years. WhiteHawk Energy currently manages approximately
850,000 gross unit acres within core operating areas of the
Marcellus Shale and Haynesville Shale, with interests in more than
2,500 producing horizontal wells. Please go to
www.whitehawkenergy.com for more information.
Additional Information
This press release does not constitute an offer to buy or
solicitation of an offer to sell any securities. This press release
relates to a proposal which WhiteHawk has made for a combination
with PHX. In furtherance of this proposal and subject to future
developments, WhiteHawk (and, if a negotiated transaction is
agreed, PHX) may file one or more registration statements, proxy
statements or other documents with the U.S. Securities and Exchange
Commission (“SEC”). This press release is not a substitute for any
proxy statement, registration statement, prospectus or other
document WhiteHawk or PHX may file with the SEC in connection with
the proposed transaction.
Investors and security holders of WhiteHawk and PHX are urged to
read the proxy statement(s), registration statement, prospectus
and/or other documents filed with the SEC carefully in their
entirety if and when they become available as they will contain
important information about the proposed transaction. Any
definitive proxy statement(s) or prospectus(es) (if and when
available) will be mailed to stockholders of PHX, as applicable.
Investors and security holders will be able to obtain free copies
of these documents (if and when available) and other documents
filed with the SEC by PHX through the website maintained by the SEC
at http://www.sec.gov.
This press release is neither a solicitation of a proxy nor a
substitute for any proxy statement or other filings that may be
made with the SEC. Nonetheless, WhiteHawk and its executive
officers and other members of management and employees may be
deemed to be participants in the solicitation of proxies in respect
of the proposed transactions. Additional information regarding the
interests of such potential participants will be included in one or
more registration statements, proxy statements or other documents
filed with the SEC if and when they become available. INVESTORS AND
SECURITY HOLDERS OF PHX ARE URGED TO READ THESE AND OTHER DOCUMENTS
FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY IF AND WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE PROPOSED TRANSACTION. These documents (if and when
available) may be obtained free of charge from the SEC’s website at
http://www.sec.gov.
Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These statements include projections and estimates and their
underlying assumptions, statements regarding plans, objectives,
intentions and expectations with respect to future financial
results, events, operations, services, product development and
potential, and statements regarding future performance. Such
statements are based on WhiteHawk’s management’s beliefs and
assumptions based on information currently available to WhiteHawk’s
management. All statements in this press release, other than
statements of historical fact, are forward-looking statements that
may be identified by the use of the words “outlook,” “guidance,”
“expects,” “believes,” “anticipates,” “should,” “estimates,” and
similar expressions. These forward-looking statements involve known
and unknown risks and uncertainties, which may cause WhiteHawk’s or
PHX’s actual results and performance to be materially different
from those expressed or implied in the forward-looking statements.
Factors and risks that may impact future results and performance
include, but are not limited to those factors and risks described
in Part I, Item 1A, “Risk Factors” in PHX’s Annual Reports on Form
10-K filed with the Securities and Exchange Commission (the “SEC”)
for the fiscal year ended September 30, 2022 and in other filings
with the SEC. These include, but are not limited to: (i) the
ultimate outcome of any possible transaction between WhiteHawk and
PHX, including the possibility that PHX will reject the proposed
transaction with WhiteHawk; (ii) uncertainties as to whether PHX
will cooperate with WhiteHawk regarding the proposed transaction;
(iii) the effect of the announcement of the proposed transaction on
the ability of WhiteHawk and PHX to operate their respective
businesses and retain and hire key personnel and to maintain
favorable business relationships; (iv) the timing of the proposed
transaction; (v) the ability to satisfy closing conditions to the
completion of the proposed transaction (including any necessary
stockholder approvals); (vi) other risks related to the completion
of the proposed transaction and actions related thereto; (vii)
changes in demand for WhiteHawk’s or PHX’s products or services;
(viii) impacts of natural disasters, adverse changes in laws and
regulations including governing property tax, evictions, rental
rates, minimum wage levels, and insurance, adverse economic effects
from the COVID-19 pandemic, international military conflicts, or
similar events impacting public health and/or economic activity;
(ix) adverse impacts to WhiteHawk or PHX and their respective
customers from inflation, unfavorable foreign currency rate
fluctuations, changes in federal or state tax laws; and (x)
security breaches, including ransomware, or a failure of
WhiteHawk’s or PHX’s respective networks, systems or
technology.
1 Increased to 61% in the June 20, 2023 letter, after including
a 5% premium relative to the initial proposal and is based on PHX
and WhiteHawk’s assets, stock price, and financials as of the June
20, 2023 letter. 2 Increased to 61% in the Revised Proposal after
including a 5% premium relative to the Initial Proposal and is
based on PHX and WhiteHawk’s assets, stock price, and financials as
of the Revised Proposal.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230809352276/en/
jslotterback@whitehawkenergy.com
PHX Minerals (NYSE:PHX)
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PHX Minerals (NYSE:PHX)
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