Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 1 of 19
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
ROB BARRETT, Individually and On Behalf CIVIL ACTION NO.
of All Others Similarly Situated,
CLASS ACTION COMPLAINT FOR
Plaintiffs,
VIOLATIONS OF THE FEDERAL
vs.
SECURITIES LAW
FLOYD C. WILSON, JAMES W. JURY TRIAL DEMANDED
CHRISTMAS, ROBERT C. STONE, JR.,
JAMES L. IRISH, III, CHRISTOPHER A.
VIGGIANO, THOMAS R. FULLER, GARY
A. MERRIMAN, STEVE P. SMILEY,
PETROHAWK ENERGY CORPORATION,
BHP BILLITON LIMITED AND NORTH
AMERICA HOLDINGS II INC.,
Defendants.
CLASS ACTION COMPLAINT
1.
This is a stockholder class action brought on behalf of the public stockholders of
Petrohawk Energy Corporation ("Petrohawk" or the "Company") against the Company's Board
of Directors (the "Board") for breaches of fiduciary duty arising out of Defendants' decision to
sell the Company to BHP Billiton Limited and its wholly-owned subsidiary North America
Holdings II Inc. (collectively "BHP") at an inadequate and for an unfair price following a grossly
unfair process (the "Proposed Merger") pursuant to an Agreement and Plan of Merger between
Petrohawk and BHP dated as of July 14, 2011 (the "Merger Agreement").
2.
Plaintiff alleges that the sale of Petrohawk to BHP contemplated by the Merger
Agreement is unfair and inequitable to the Petrohawk public stockholders and constitutes a
breach of the fiduciary duties of the directors in the sale of Petrohawk. Plaintiff also alleges that
the Merger Agreement and transactions approved and contemplated thereby, including the
Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 2 of 19
Tender Offer, are unfairly and inequitably coercive to the public stockholders in a sale of the
Company and that the stockholders are not provided with a voluntary choice whether to tender
their shares.
3.
The Merger Agreement contemplates, among other things, a tender offer by BHP
for all Petrohawk shares at $38.75 per share (the "Tender Offer"), a so-called "Top-Up Option"
giving BHP the right to buy additional new Petrohawk shares at $38.75 to give BHP 90%
ownership, and a short-form merger at $38.75 per share by virtue of the tendered shares plus the
additional new shares.
4.
The Tender Offer commenced on July 25, 2011 and is set to expire on August 19,
2011, unless extended in accordance with the terms of the Merger Agreement.
5.
The Petrohawk Board of Directors has unanimously recommended that
Petrohawk stockholders tender.
6.
The recent historical averages for Petrohawk's stock price demonstrate that the
consideration being offered by BHP is unfair and inadequate. The $38.75 per share represents an
inadequate premium to the trading price of the Company's common stock.
7.
The consideration to be paid to the class members is unfair and grossly inadequate
because, among other things: (a) the intrinsic value of the stock of Petrohawk is materially in
excess of $38.75 per share, giving due consideration to the possibilities of growth and
profitability of Petrohawk in light of its business, earnings and earnings power, present and
future; (b) the $38.75 per share price offers an inadequate premium to the public stockholders of
Petrohawk; and (c) the $38.75 per share price is not the result of ann's-length negotiations but
was fixed arbitrarily by certain insiders and BHP to "cap" the market price of Petrohawk stock,
2
Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 3 of 19
as part of a plan for BHP to obtain complete ownership of Petrohawk assets and business at the
lowest possible price.
8.
Defendants have exacerbated their breaches of fiduciary duty by agreeing to lock
up the Proposed Merger with deal protection devices that preclude other bidders from making a
successful competing offer for the Company. Specifically, Defendants agreed to: (i) a nosolicitation provision that prevents other buyers from having access to the Company's
confidential information which information is necessary to formulate a bid, except under
extremely limited circumstances; (ii) a matching rights provision that allows BHP 3 days to
match any competing proposal in the event one is made; and (iii) a provision that requires the
Company to pay BHP a termination fee of $395 million under specified circumstances, including
the acceptance of a superior proposal by another party. These provisions limit the Board of
Directors' ability to act with respect to investigating and pursuing superior proposals and
alternatives including a sale of all or part of Petrohawk.
9.
On July 25, 2011, Petrohawk filed a Schedule 14D-9 (the "14D-9") with the
Securities and Exchange Commission ("SEC") in connection with the Proposed Merger pursuant
to which, inter alia, the Petrohawk Board of Directors recommended that Petrohawk
stockholders tender their shares in favor of the Tender Offer. In connection with the 14D-9,
Defendants have breached their duty of candor by failing to disclose material information to
14D-9 shareholders necessary for them to determine whether to vote in favor of the Proposed
Merger.
10.
The Proposed Merger serves no legitimate business purpose for Petrohawk but
rather is an attempt by Defendants to enable BHP to benefit unfairly from the transaction at the
expense of Petrohawk's public shareholders. The proposed cash-out transaction will forever
3
Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 4 of 19
divest Petrohawk public shareholders of their ownership interest in the Company for grossly
inadequate consideration. As such, the Proposed. Merger will deny Plaintiff and the other
members of the class their right to share proportionately in the future success of Petrohawk and
its valuable assets, while permitting certain Petrohawk insiders and BHP to reap huge financial
benefits From the transaction. Accordingly, judicial scrutiny of the Proposed Merger is necessary
to ensure that the best interest of all Petrohawk shareholders, and not the interests of the
Defendants, was the basis for the Petrohawk Board's decision to enter into the Proposed Merger.
11.
In entering into the Merger Agreement, each of the Defendants violated and
continues to violate applicable law by directly breaching and/or aiding and abetting the
Defendants' breaches of their fiduciary duties of loyalty, due care, independence, good faith and
fair dealing.
12.
As alleged herein, the Proposed Merger is the product of a hopelessly flawed
process that was designed to sell Petrohawk to BHP on terms detrimental to Plaintiff and the
other public stockholders of Petrohawk.
JURISDICTION AND VENUE
13.
The Court has jurisdiction over the subject matter of this action. This action is not
a collusive action designed to confer jurisdiction on a court of the United States that it would not
otherwise have. The claims asserted herein arise under Section 14(e) of the Securities Exchange
Act, 15 U.S.C. § 78aa. This Court has jurisdiction pursuant to Section 27 of the Securities
Exchange Act, 15 U.S.C. §78aa and 28 U.S.C. §§ 1331, 1367.
14.
Venue is proper in this District pursuant to 28 U.S.C. §1391(a)(2) (2008) because -
the Company is headquartered in this District and a substantial portion of the transaction and
occurrences complained of herein, including the Defendants' primary participation in the
4
„
„
Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 5 of 19
wrongful acts detailed herein, occurred in this District. In addition, one or more of the
Defendants either resides in or maintains executive offices in this District.
PARTIES
15.
Plaintiff is and has been at all relevant times a shareholder of Petrohawk.
16.
Petrohawk is a Delaware corporation with its principal place of business located
1000 Louisiana, Suite 5600, Houston, Texas, 77002. Petrohawk engages in the exploration,
development, and production of natural gas properties located in the United States. The
Company has interests in various properties located in North Louisiana, East Texas, and South
Texas. As of December 31, 2010, its estimated total proved oil and natural gas reserves were
approximately 3,392 billion cubic feet of natural gas equivalent consisting of 3,110 billion cubic
feet of natural gas, 20 million barrels of oil, and 27 million barrels of natural gas liquids.
Petrohawk was founded in 1997. The Company's stock trades under the symbol "HK" on the
NYSE.
17.
Defendant Floyd C. Wilson ("Wilson") is and has been at all relevant times the
Chairman, President and Chief Executive Officer of the Board of Petrohawk. Defendant Wilson
is Chairman, President and Chief Executive Officer at Petrohawk Management Co. LLC,
Founder at Petrohawk Energy LLC, Founder at W, Founder at Hugoton Energy Corp., and
Chairman, President and Chief Executive Officer at HK Energy Partners LP.
18.
Defendant James W. Christmas is and has been at all relevant times Vice
Chairman and a director of Petrohawk.
19.
Defendant Robert C. Stone, Jr. ("Stone") is and has been at all relevant times a
director of Petrohawk. Defendant Stone is Founder at ENG Energy Advisory LLC.
5
Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 6 of 19
20.
Defendant James L. Irish, III ("Irish") is and has been at all relevant times a
director of Petrohawk. Defendant Irish is Of Counsel at Thompson & Knight LLP, a Member at
Texas State Bar Association, a Member at Dallas Bar Association, and a Member at American
College of Investment Counsel.
21.
Defendant Steve P. Smiley ("Smiley") is and has been at all relevant times a
director of Petrohawk. Smiley is President at Hunt Private Equity Group, Inc. Smiley is a
member of the board of directors of Dynamex, Inc., Universal Companies, a Hunt Investment
Group portfolio company. Defendant Smiley is on the board of trustees of the Amon Carter
Museum, the St. Phillips School and Community Center Foundation in Dallas and is a member
of the Arts Council at the University of Virginia.
22.
Defendant Thomas R. Fuller ("Fuller") is and has been at all relevant times a
director of Petrohawk. Fuller is a Principal at Diverse Group of Cos. and a Principal at Diverse
Energy Management Co.
23.
Defendant Gary A. Merriman is and has been at all relevant times a director of
Petrohawk.
24.
Defendant Christopher A. Viggiano, is and has been at all relevant times a
director of Petrohawk. Defendant Viggiano is Chairman & President at O'Bryari Glass Corp.
25.
The Defendants named in TT 17-24 are sometimes collectively referred to herein
as the "Individual Defendants."
26.
Defendant BHP, incorporated in Australia, engages in producing alumina and
aluminum, copper, coal, iron ore, nickel, manganese, metallurgical coal, oil and gas, and
uranium, as well as gold, zinc, lead, silver, and diamonds. BHP was founded in June 2001 and is
headquartered in Melbourne, Australia.
6
Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 7 of 19
27.
Defendant North America Holdings II Inc. ("Merger Sub"), a Delaware
corporation, was organized as a wholly-owned subsidiary of BHP for the sole purpose of making
a tender offer for the outstanding shares of common stock of Petrohawk and completing the
Merger.
28.
Defendants BHP and Merger Sub are collectively referred to herein as "BIIP",
and are named herein as alders and abettors to the Individual Defendants' breaches of fiduciary
duty.
CLASS ALLEGATIONS
29.
Plaintiff brings this action individually and as a class action pursuant to the rules
of this Court, on behalf of all public stockholders of Petrohawk, except Defendants herein and
any person, firm, trust, corporation, or other entity related to or affiliated with any of the
Defendants, who are threatened with injury arising from Defendants' actions as is described
more fully below (the "Class").
30.
This action is properly maintainable as a class action.
31.
The Class is so numerous that joinder of all members is impracticable.
32.
There are more than 303 million shares of Petrohawk common stock outstanding
held by thousands of shareholders geographically dispersed across the country.
33.
There are questions of law and fact which are common to the Class including,
inter alia, the following:
(a) whether Defendants have breached and are continuing to breach their
fiduciary duties of undivided loyalty, independence or due care with respect to Plaintiff and the
other members of the Class in connection with the Proposed Merger; and
7
Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 8 of 19
(b)
whether Plaintiff and the other members of the Class would suffer
irreparable injury were the transaction complained of herein consummated.
34.
Plaintiffs claims are typical of the claims of the other members of the Class and
Plaintiff does not have any interests adverse to the Class.
35.
Plaintiff is an adequate representative of the Class, has retained competent
counsel experienced in litigation of this nature and will fairly and adequately protect the interests
of the Class.
36.
The prosecution of separate actions by individual members of the Class would
create a risk of inconsistent or varying adjudications with respect to individual members of the
Class which would establish incompatible standards of conduct for the party opposing the Class.
37.
Defendants have acted on grounds generally applicable to the Class with respect
to the matters complained of herein, thereby making appropriate the relief sought herein with
respect to the Class as a whole.
SUBSTANTIVE ALLEGATIONS
38.
On July 15, 2011, the Company and BHP jointly announced that they had entered
into a definitive agreement or the Proposed Merger for BHP to acquire the outstanding shares of
Petrohawk for $38.75 per share in an all-cash tender offer. The press release stated in pertinent
part:
BHP Billiton [ASX: BHP, NYSE: BHP, LSE: BLT, JSE: BM] and
Petrohawk Energy Corporation ("Petrohawk") [NYSE: HK] announced
today that the companies have entered into a definitive agreement for BHP
Billiton to acquire Petrohawk for US$38.75 per share by means of an allcash tender offer for all of the issued and outstanding shares of Petrohawk,
representing a total equity value of approximately US$12.1 billion and a
total enterprise value of approximately US$15.1 billion, including the
assumption of net debt. The Petrohawk board of directors has unanimously
recommended to Petrohawk shareholders that they accept the offer.
8
Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 9 of 19
The transaction would provide BHP Billiton with operated positions in the
three world class resource plays of the Eagle Ford and Haynesville shales,
and the Permian Basin. Petrohawk's assets cover approximately 1,000,000
net acres in Texas and Louisiana, with estimated 2011 net production of
approximately 950 million cubic feet equivalent per day (MMefe/d), or 158
thousand barrels of oil equivalent per day (Mboe/d). At year-end 2010,
Petrohawk reported proved reserves of 3.4 trillion cubic feet of natural gas
equivalent (Tcfe). The company has a current non-proved resources base of
32 Tab for a total risked resource base of 35 Tcfe. Petrohawk reported
gross assets of US$8.2 billion as at 31 March 2011 and US$390 million of
profit before tax for the year ended 31 December 2010.
BHP Billiton CEO, Marius Kloppers, said the acquisition was a natural fit
with BHP Billiton's strategy.
"The proposed acquisition of Petrohawk is consistent with our well defined,
upstream, Tier 1 strategy and provides us with even greater exposure to the
world's largest energy market, while also broadening our geographic and
customer spread. Importantly, our offer and the associated substantial
premium represent a unique opportunity for Petrohawk shareholders and
recognise the growth opportunities embedded in its portfolio immediately."
BHP Billiton Petroleum Chief Executive, J. Michael Yeager, said the
Petrohawk acquisition would add high quality growth to the company.
39.
The $38.75 per share price agreed to by the Board does not currently represent
fair value for the Company in that it does not reflect the long-term value of the Company, and
the future financial prospects of Petrohawk.
THE PRECLUSIVE DEAL PROTECTION DEVICES
40.
In addition to agreeing to a sale of the Company at an unfair price, the Individual
Defendants agreed to onerous deal protection devices in breach of their fiduciary duties to
Petrohawk shareholders, which prevent a superior offer from being made for the Company.
41.
Specifically, Defendants agreed to: (i) a no-solicitation provision that prevents
other buyers from having access to the Company's confidential information which information is
necessary to formulate a bid, except under extremely limited circumstances; (iii) a matching
rights provision that allows BHP 10 days to match any competing proposal in the event one is
9
Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 10 of 19
made; and (iv) a provision that requires the Company to pay BHP a termination fee of $395
million under certain circumstances, including the acceptance of a superior proposal by another
party. These provisions substantially limit the Board of Directors' ability to act with respect to
investigating and pursuing superior proposals and alternatives including a sale of all or part of
Petrohawk.
42.
The terms of the Merger Agreement considerably restrain the Company's ability
to solicit or engage in negotiations with any third party regarding an acquisition proposal to the
Company. The circumstances under which Petrohawk's Board may respond to an unsolicited
written bona fide proposal for an alternative acquisition that constitutes or would reasonably be
expected to constitute a superior proposal are restrictive and fail to provide an effective fiduciary
out under the circumstances of the case.
43.
Thus, even if the Board were to receive a bid that appeared to be better than
BHP's offer, these provisions unreasonably constrain the Board's exercise of fiduciary
responsibility to take measures to secure the best available transaction. Consequently, this
provision prevents the Board from exercising their fiduciary duties of "shopping" the Company
and precludes an investigation into competing proposals unless, as a prerequisite, the majority of
the Board first determines that the proposal is superior.
44.
Pursuant to the Merger Agreement, Petrohawk granted BHP an option to purchase
the number of authorized and unissued Company shares equal to an additional number of
Petrohawk shares such that immediately after the issuance of those additional shares, BHP would
own at least 90% of the outstanding shares of the Company (the "Top-Up Option"), in order to
allow BHP to effect a short-form merger pursuant to 8 Del. C. 253. The Top-Up Option
irrevocably grants BHP the right to purchase enough new Petrohawk shares from the Company
10
Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 11 of 19
to bring BHP's ownership above the necessary 90% threshold for a short form merger under
Delaware law.
45.
The Top-Up Option also provides a contractual right to BHP to attain the status of
a 90% stockholder and thereby avoid voting requirement of Section 251 and the fairness standard
on controlling stockholders in transactions with the minority. The Top-Up and other preclusive
deal protection devices constitute unfair and illegal abdications of directors' authority and unfair
and inequitable evasion of stockholder rights.
THE 14D-9 IS MATERIALLY MISLEADING AND/OR INCOMPLETE
46.
On July 15, 2011, Petrohawk filed the 14D-9 in connection with the Proposed
Merger incorporating the recommendation of the Company's Board of Directors to shareholders
to tender their shares in the Tender Offer.
47.
The 14D-9 fails to provide the Company's shareholders with material information
and/or provides them with materially misleading information thereby rendering the shareholders
unable to make an informed decision on whether to vote in favor of the Proposed Merger.
48.
For example, the 14D-9 completely fails to disclose the underlying
methodologies, projections, key inputs and multiples relied upon and observed by Goldman
Sachs & Co. ("Goldman Sachs"), the Company's financial advisor, so that shareholders can
properly assess the credibility of the various analyses performed by Goldman Sachs and relied
upon by the Board in recommending the Proposed Merger. In particular, the 14D-9 is deficient
and should provide, inter alia, the following:
A. the Net Asset Value Analysis fails to disclose: (i) the basis for using
discount rates ranging from 10% to 13%; and (ii) the basis for the
assumptions whereby Goldman Sachs credited 80% of the value of
the Company's undeveloped reserves and resources in the
Company's Eagle Ford Shale asset and 25% of the value of the
11
Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 12 of 19
Company's undeveloped reserves and resources in the Company's
Permian Basin asset.
49.
B.
the Premiums Paid Analysis fails to disclose: (i) the reasons for the
data points selected; (ii) the dates of all of the transactions; and (iii)
the respective premiums in each transaction.
C.
the Sum of the Parts Analysis fails to disclose the basis for using a
10% discount rate.
D.
the Selected Companies Analysis fails to disclose: (i) the criteria
utilized to select the companies used; and (ii) a complete list of
multiples observed for EBITDA, Discretionary Cash Flow and
Reserve Value.
In addition, the 14D-9 fails to disclose the retention process of Goldman Sachs
and/or the amount of fees paid by the Company for prior services rendered. Moreover, the 14D9 fails to disclose the contingent "principal portion" of the approximately $30 million transaction
fee that the Company has agreed to pay Goldman Sachs. This information is critical since a
shareholder does not know whether the fees are material or not.
50.
The 14D-9 fails to disclose with any specificity the discussion at the June 20,
2011 board meeting regarding the key assumptions and potential risks and opportunities
associated with the Company's five-year plan, which was an updated version of the plan that the
Board had reviewed and discussed in the past in advance of BHP Billiton's proposal. This
information is critical since a shareholder does not know the potential for success in connection
with the Company's five-year plan.
51.
The 14D-9 fails to disclose the basis for Wilson's counter-offer of $40 per share
in response to BHP's $37.50 per share offer. This information is critical since a shareholder does
not know if a higher price was attainable for the Petrohawk shares.
12
Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 13 of 19
52. The 14D-9 fails to disclose what was discussed with the Board at its July 12, 2011
meeting concerning the "sufficient number of executives, officers and other employees were
prepared to enter into such agreements concurrently with the execution of the Merger
Agreement" to satisfy BHP's requirement for signing the Merger Agreement.
53.
It is absolutely necessary for shareholders to receive a 14D-9 that provides all -
material disclosures related to the sales process in order for shareholders to be able to cast a
fully informed decision regarding the Proposed Merger.
GOLDMAN SACHS, THE COMPANY'S FINANCIAL ADVISOR, IS CONFLICTED
54.
Goldman Sachs acted as financial advisor to the Company in connection with, and
participated in certain of the negotiations leading to the Transaction. According to the 14D-9,
Goldman Sachs has provided certain investment banking services to the Company and its
affiliates from time to time for which Goldman Sachs' Investment Banking Division has
received, and may receive, compensation, including having acted as joint bookrunner in May
2011 with respect to an offering of the Company's 6.25% Senior Notes due May 2019
(aggregate principal amount of $600 million). In addition, the 14D-9 notes, that (i) Goldman
Sachs also has provided certain investment banking services to the Guarantor and its affiliates
from time to time for which Goldman Sachs' Investment Banking Division has received, and
may receive, compensation, including having acted as financial advisor to the Guarantor in
connection with its offer to acquire Rio Tinto announced February 2008; and (ii) Goldman
Sachs may also in the future provide investment banking services to the Company, the
Guarantor and their respective affiliates for which the Investment Banking Division of Goldman
Sachs may receive compensation.
13
Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 14 of 19
55. Pursuant to a letter agreement dated June 29, 2011, the Company has agreed to
pay Goldman Sachs a transaction fee of approximately $30 million, the principal portion of
which is payable upon consummation of the Transactions. As a result of the contingent portion
of the fee (the amount of which is not disclosed), in addition to other relationships Goldman
Sachs may have with Defendants, shareholders may not be able to rely on Goldman Sachs to
render an unbiased, disinterested opinion, nor should the Individual Defendants have done so.
DEFENDANTS' FIDUCIARY DUTIES
56.
By reason of the Individual Defendants' positions with the Company as officers
and/or directors, said individuals are in a fiduciary relationship with Plaintiff and the other public
shareholders of Petrohawk and owe Plaintiff and the other members of the Class a duty of good
faith, fair dealing, loyalty and full and candid disclosure.
57.
By virtue of their positions as directors and/or officers of Petrohawk, the
Individual Defendants, at all relevant times, had the power to control and influence, and did
control and influence and cause Petrohawk to engage in the practices complained of herein.
58.
Each of the Individual Defendants is required to act in good faith, in the best
interests of the Company's shareholders and with due care, including reasonable inquiry, as
would be expected of an ordinarily prudent person. In a situation where the directors of a
publicly-traded company undertake a transaction that may result in a change in corporate control,
Delaware law imposes the obligation on the directors to take all steps reasonably required to
maximize the value that shareholders will receive rather than use a change of control to benefit
themselves, and to disclose all material information concerning the proposed change of control to
enable the shareholders to make an informed voting decision. To diligently comply with this
duty, the directors of a corporation may not take any action that:
14
Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 15 of 19
(a)
adversely affects the value provided to the corporation's shareholders;
(b)
contractually prohibits them from complying with or carrying out their
fiduciary duties;
(c)
discourages or inhibits alternative offers to purchase- control of the
corporation or its assets; or
(d)
otherwise adversely affects their duty to search and secure the best value
reasonably available under the circumstances for the corporation's shareholders.
COUNT I
Against Petrohawk and The Individual Defendants for Violation of
414(e) of the Securities Exchange Act of 1934
59.
Plaintiff incorporates by reference and realleges each and every allegation set
forth above, as though fully set forth herein.
60.
This claim is brought by Plaintiff against Defendants for violations of §14(e) of
the Securities Exchange Act of 1934, 15 U.S.C. § 7n(e), and SEC rules promulgated thereunder.
61.
The Defendants named in this claim disseminated the false and misleading 14D-9
which they knew or should have known was misleading in that it contained misrepresentations
and failed to disclose material facts necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading.
62.
The 14D-9 was prepared and disseminated by Defendants named in this claim. It
misrepresented and/or concealed certain material information concerning the nature of the
process involved in the Tender Offer and the true value of the Company. In so doing, they made
untrue statements of material facts and omitted to state material facts necessary to make the
statements that were made not misleading in violation of §14(e) of the 1934 Act and SEC Rule
14a-9 promulgated thereunder.
15
Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 16 of 19
63.
The Defendants named in this claim issued the 14D-9, which was materially false
and misleading. The Defendants were aware of and/or had access to the true facts concerning
the process involved in selling the Company and the true value of the Company. However,
notwithstanding this knowledge, each of the Defendants purported to and/or approved the
dissemination of the false 14D-9.
64.
Defendants permitted Tender Offer in an effort to aggrandize their own financial
position and interests at the expense of and to the detriment of Petrohawk shareholders. By
relying on the false and misleading statements in the 14D-9, the majority of the shareholders who
are unaware of untruths, and relied thereon, were directly and proximately harmed by the
Defendants' wrongful conduct. By reason of such misconduct, the Defendants are liable
pursuant to §14(e) of the 1934 Act and SEC rules promulgated thereunder.
COUNT II
Claim for Breach of Fiduciary Duties
65.
Plaintiff repeats and realleges each allegation set forth herein.
66.
The Individual Defendants have violated their fiduciary duties of care, good faith,
loyalty and candor owed under applicable law to the public shareholders of Petrohawk and have
placed the interests of insiders ahead of the interests of Petrohawk's shareholders.
67.
As demonstrated by the allegations above, the Individual Defendants failed to
exercise the care required, and breached their duties of loyalty, good faith, care and candor owed
to the shareholders of Petrohawk because, among other reasons:
(a)
they failed to properly value Petrohawk;
(b)
they failed to take steps to maximize the value of Petrohawk to its public
shareholders and they took steps to avoid competitive bidding, and to give BHP an unfair
16
Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 17 of 19
advantage, by, among other things, failing to adequately solicit other potential acquirors or
alternative transactions;
(c)
they failed to properly value Petrohawk and its various assets and
(d)
they failed to provide shareholders with the material information
operations;
necessary to make an informed decision as to whether or not to vote in favor of the Proposed
Merger; and
(e)
68.
they erected unreasonable barriers to other third-party bidders.
By the acts, transactions and courses of conduct alleged herein, the Individual
Defendants, individually and as part of a common plan and scheme and in breach of their
fiduciary duties of loyalty, good faith and due care to Plaintiff and the other members of the
Class, have failed to adequately inform themselves about the true value of the Company and, by
agreeing to the Proposed Merger with BHP, will unfairly deprive Plaintiff and other members of
the Class of the true value of their investment in Petrohawk.
69.
Petrohawk shareholders will, if the Proposed Merger is consummated, be
deprived of the opportunity for substantial gains which the Company may realize.
70.
By reason of the foregoing acts, practices and course of conduct, the Individual
Defendants have failed to exercise care and diligence in the exercise of their fiduciary
obligations toward Plaintiff and the other Petrohawk public stockholders.
71.
As a result of the actions of Defendants, Plaintiff and the other members of the
Class have been and will be damaged in that they have not and will not receive their fair
proportion of the value of Petrohawk's assets and businesses and will be prevented from
obtaining appropriate consideration for their shares of Petrohawk common stock.
17
Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 18 of 19
72.
Unless enjoined by this Court, the Defendants will continue to breach their
fiduciary duties owed to Plaintiff and the other members of the Class, and may consummate the
Proposed Merger which will exclude the Class from its fair proportionate share of Petrohawk's
valuable assets and businesses, all to the irreparable harm of the Class, as aforesaid.
73.
Plaintiff and the Class have no adequate remedy at law. Only through the
exercise of this Court's equitable powers can Plaintiff and the Class be fully protected from the
immediate and irreparable injury which Defendants' actions threaten to inflict.
COUNT III
Claim for Aiding and Abetting the
Individual Defendants' Breaches of Fiduciary Duty
74.
Plaintiff incorporates by reference and realleges each and every allegation
contained above, as though fully set forth herein.
75.
BHP has knowingly aided and abetted the Individual Defendants' wrongdoing
alleged herein. BHP is also active and necessary participants in the Individual Defendants' plan
to consummate the Proposed Merger on terms that are unfair to Petrohawk shareholders, as BHP
seeks to pay as little as possible to Petrohawk shareholders.
76.
Plaintiff has no adequate remedy at law.
JURY DEMAND
Plaintiff hereby demands a trial by jury.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff demands relief in his favor and in favor of the Class and
against Defendants as follows:
A.
Declaring that this action is properly maintainable as a Class action and certifying
Plaintiff as a representative of the Class;
18
Case 4:11-cv-02852 Document 1 Filed in TXSD on 08/02/11 Page 19 of 19
B.
Enjoining Defendants, their agents, counsel, employees and all persons acting in
concert with them from consummating the Proposed Merger, unless and until the Company
adopts and implements a procedure or process to obtain a merger agreement providing the best
possible terms for shareholders;
C.
Enjoining Defendants from consummating the Merger Agreement and Proposed
Merger unless and until they provide to Petrohawk shareholders all material information in
connection with the proposed transaction;
D.
Awarding Plaintiff the costs and disbursements of this action, including
reasonable attorneys' and experts' fees; and
E.
Granting such other and further relief as this Court may deem just and proper.
DATED: August 2, 2011.
SCHWARTZ, JUNELL, GREENBERG
& OATHOUT, L.L.P.
Is/ Roger B. Greenberg
Roger B. Greenberg
Federal I.D. No. 3932
Texas SBN 08390000
Thane Tyler Spouse! III
Federal I.D. No. 690068
Texas SBN 24056361
Two Houston Center
909 Fannin, Suite 2700
Houston, Texas 77010
Telephone: (713) 752-0017
Facsimile: (713) 752-0327
Counsel for Plaintiff
OF COUNSEL:
BULL & LIFSHITZ, LLP
18 East 41st Street
New York, NY 10017
Tel: (212) 213-6222
Fax: (212) 213-9405
19