Filed by: WhiteHawk Income Corp
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the
Securities Exchange Act of 1934
Subject Company: PHX MINERALS INC.
Commission File No.: 001-31759
NEWS RELEASE
WhiteHawk Energy
Proposes to Combine with PHX Minerals, Inc. in Stock-for-Stock Transaction
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
PHILADELPHIA, Pennsylvania –
Aug. 9, 2023 – 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.; |
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.
| · | 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”).
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.
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.
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