(Updates with share prices in 11th paragraph.)
July 19 (Bloomberg) -- Petrohawk Energy Corp. was sued by a shareholder over claims its proposed $12.1 billion cash sale to BHP Billiton Ltd. undervalues the company.
The deal creates a conflict of interest on the part of directors that “colors their ability to make an unbiased decision” regarding the fairness of the proposal, shareholder Astor BK Realty Trust said in the complaint filed yesterday in Delaware Chancery Court in Wilmington. Astor is seeking to represent all Petrohawk shareholders in its request for a court order barring the transaction.
“The board’s acceptance of BHP’s offer demonstrates the company’s all-too-eager-to-sell mentality,” lawyers for the trust said in the complaint.
BHP, based in Melbourne, said last week it would pay $38.75 a share using cash and debt for Petrohawk, its biggest acquisition. The offer is 61 percent more than Houston-based Petrohawk’s average price over the past 20 trading days and compares with the 25 percent average premium in 17 deals worth at least $5 billion for oil and gas producers in the past five years, according to data compiled by Bloomberg.
The deal gives BHP three fields across about 1 million acres in Texas and Louisiana, propelling BHP into the top 10 of oil and gas companies. BHP expects to complete the acquisition in the third quarter.
Petrohawk Chief Executive Officer Floyd C. Wilson will make about $152 million from the deal on his roughly 3 million shares, and will likely be eligible for a $10.4 million change- of-control payment, according to the complaint. Stock options could add $24.85 million, according to the complaint.
‘Conflict of Interest’
“This substantial conflict of interest casts doubt on the board’s ability to make an unbiased decision regarding the benefits of the proposed transaction to Petrohawk’s shareholders,” Astor said in the complaint.
The deal also includes onerous and preclusive protection devices including a $395 million termination fee if Petrohawk decides to pursue a competing offer, lawyers for the trust said in the complaint.
The trust is seeking unspecified damages in addition to a court order barring the transaction.
Joan Dunlap, a spokeswoman for Petrohawk, and Ruban Yogarajah, a London-based spokesman for BHP, both declined to comment.
Petrohawk rose 5 cents to $38.22 at 3:20 p.m. in New York Stock Exchange composite trading. The shares have more than doubled this year. BHP closed in London at 2,326 pence.
The case is Astor BK Realty Trust v. Petrohawk Energy Corp., CA6675, Delaware Chancery Court (Wilmington).
--With assistance from Mike Lee in Dallas and Phil Milford in Wilmington, Delaware. Editors: Stephen Farr, Glenn Holdcraft
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