We are investigating whether the directors of Falcon Minerals (Nasdaq: FLMN) (“Falcon”) acted in the best interests of FLMN shareholders in approving a merger with privately-held Desert Peak Minerals (“Desert Peak”). In particular, as detailed further below, affiliates of Blackstone, Inc. (“Blackstone”) sit on both sides of the transaction.
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Why is there an investigation?
On January 12, 2022, Desert Peak and Falcon announced that they had agreed to merge in an all-stock transaction that will value the combined enterprise at $1.9 billion.
Our investigation concerns whether Falcon’s board acted in the best interests of FLMN shareholders in approving the merger with Desert Peak. In particular, upon completion of the merger, Desert Peak’s current stockholders will own approximately 73% of the combined entity, while existing Falcon shareholders will only own approximately 27% of the combined entity. Moreover, Desert Peak’s current stockholders may receive additional equity if Desert Peak’s net debt is less than $140 million at closing.
Further, according to SEC filings, Royal Resources L.P. (“Royal”), an affiliate of Blackstone, currently owns 40.6% of the voting power of Falcon, and has entered into a support agreement obligating it to vote in favor of the merger. However, on June 30, 2021, a different affiliate of Blackstone, Rock Ridge Royalty Company, LLC (“Rock Ridge”), sold approximately 18,500 Net Royalty Acres in the Delaware Basin to Desert Peak. According to SEC filings, Rock Ridge presently owns 19.8% of Desert Peak, and thus affiliates of Blackstone sit on both sides of the transaction.
Finally, according to Falcon’s last proxy statement, Blackstone itself separately owns shares constituting 3.5% of the voting power of Falcon.
Since the deal was announced, Falcon’s stock price has dropped from a close of $5.45 on January 11, 2022, to a close of $4.98 on January 14, 2022.