October 26, 2009 09:35 AM Eastern Daylight Time Black Stone Minerals Ups Offer for Eagle Rock Energy Partners LP and Removes Contingencies to Global Solution
HOUSTON--(BUSINESS WIRE)--On October 26, 2009, Black Stone Minerals Company, L.P. headquartered in Houston, Texas, and certain co-investors including the LeFrak Organization, made a proposal to the Board of Eagle Rock Energy Partners, L.P. to purchase Eagle Rock’s Minerals Business for $157.5 million and to provide a $60 million equity investment commitment to support a proposed public offering by Eagle Rock of common units at $3.50 per unit. Black Stone’s previous offer included an equity investment commitment at $3.40 per unit with a requirement that a mutually agreeable arrangement be reached in order to extinguish the Subordinated Units and Incentive Distribution Rights currently owned by Natural Gas Partners, among other terms. In Black Stone’s new offer, the price per unit is increased and all contingencies are removed. There are no fees associated with Black Stone’s proposal and it is not contingent upon obtaining financing.
Black Stone is the largest private fee mineral owner in the United States, manages the largest asset in Eagle Rock’s Mineral Business and holds the executive rights to those assets. Black Stone believes that this offer is superior to any offer that has previously been made public.
While the sale of the minerals business reduces debt, it also reduces the borrowing base so more cash is needed to pay for the sub rights and to eliminate idrs. Nat gas won't just give them back for nothing in exchange. An equity offering is the way to do that. The problem I see here is that existing shareholders don't get to participate in the offering since most shares are bought by institutions and you have to have an account with the lead manager of the offering. I would love to participate in the backstop deal or the offering. The rights deal at least means you get to buy more shares at a lower price. A secondary does not, which means that existing holders will see their shares drop significantly when to offering is announced. So be careful.
No....it's just a backstop of an equity offering. So in other words, if EROC decided to raise money by selling units it would try to sell units for much more, but Blackstone will buy $50 million worth at $3.50 provided that there's not enough interest at higher prices.
Still the question to me (and others) is whether we need to raise equity at all after selling the minerals business.