PHILADELPHIA – WhiteHawk Energy, LLC, a company specializing in mineral and royalty interests, has made a public proposal to acquire PHX Minerals Inc. for $4.00 per share. This offer, detailed in a letter to PHX’s Board of Directors, represents a 19% premium over PHX’s 90-day volume-weighted average price and a 17% premium over its 30-day average, as of October 11, 2024.
The acquisition bid comes after WhiteHawk’s 18-month effort to engage with PHX, during which WhiteHawk claims PHX’s stock price has underperformed due to excessive general and administrative expenses, dilutive acquisitions, and minimal dividends. WhiteHawk, which owns approximately 2.5% of PHX’s outstanding common stock, has adjusted its proposals to meet PHX’s shifting requests and urges PHX’s Board to consider the transaction in the interest of stockholder value.
WhiteHawk’s Chairman and CEO, Daniel C. Herz, expressed disappointment in PHX’s reluctance to engage over the past year and a half, emphasizing the potential for a sale at a significant premium. Herz highlighted that since 2020, PHX has spent over $40 million in cash on G&A expenses while returning less than $12 million in dividends to stockholders. He also pointed out PHX’s lagging stock performance compared to its mineral peers and other market indices since 2020.
The acquisition proposal includes an option for qualified PHX stockholders to exchange their shares for common shares of WhiteHawk, potentially benefiting from the combined business’s value enhancement. The proposal is non-binding, and WhiteHawk has retained Stephens Inc. as its financial advisor and Weil, Gotshal & Manges LLP as its legal advisor.
WhiteHawk’s pursuit of this transaction is part of its broader strategy to consolidate interests in high-quality natural gas resource plays. It currently manages approximately 1,050,000 gross unit acres across core areas of the Marcellus and Haynesville Shales.
This news is based on a press release statement and does not constitute an offer to buy or a solicitation of an offer to sell any securities. The proposed transaction is subject to negotiation and execution of definitive documentation by WhiteHawk and PHX.
In other recent news, PHX Minerals reported a strong performance in its latest quarterly earnings call. The natural resource company marked its highest quarterly corporate volumes since the second quarter of 2018, with a significant 40% increase in total corporate production from the previous quarter. Notably, royalty volumes now make up about 90% of PHX Minerals’ production, indicating a strategic shift towards mineral assets.
Financially, the company strengthened its position by reducing debt and increasing dividends, while also closing $3.5 million in mineral acquisitions. Despite a slight dip in realized prices, sales revenues increased by a substantial 39%, largely due to increased production volumes.
PHX Minerals’ future outlook appears optimistic, with a seven-year inventory of high-quality drilling locations and expectations of continued activity increase. However, commodity prices and operator decisions are anticipated to influence future growth. These are recent developments within the company that investors should note.
InvestingPro Insights
In light of WhiteHawk Energy’s acquisition proposal for PHX Minerals Inc., it’s crucial to examine PHX’s current financial standing and market position. According to InvestingPro data, PHX’s market capitalization stands at $132.18 million, with a price-to-earnings ratio of 22.97. This valuation metric suggests that investors are willing to pay a premium for PHX’s earnings, which could be a factor in WhiteHawk’s interest.
Interestingly, PHX has demonstrated a commitment to shareholder returns, as evidenced by two key InvestingPro Tips. The company has raised its dividend for 3 consecutive years and has maintained dividend payments for an impressive 41 consecutive years. This long-standing dividend history may be at odds with WhiteHawk’s claim of “minimal dividends” and could be a point of contention in negotiations.
Furthermore, PHX’s dividend yield of 4.55% and a substantial dividend growth of 77.78% in the last twelve months indicate a strong focus on returning value to shareholders. This contrasts with WhiteHawk’s assertion that PHX has underperformed in this area.
It’s worth noting that PHX is trading near its 52-week high, with the current price at 92.26% of its peak. This could suggest that the market has already recognized some of the company’s value, potentially making WhiteHawk’s 19% premium offer less attractive to current shareholders.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights that could be valuable in assessing the full impact of this potential acquisition. There are 5 more InvestingPro Tips available for PHX, which could provide further context to this developing situation.
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