(CN) - GeoResources Inc. failed to "shop the company around" before accepting the $1 billion merger agreement proposed by Halcón Resources Corp., shareholders claim in a class action.
"The Proposed Transaction is the product of a hopelessly flawed process designed to ensure the sale of GeoResources to Halcón. Primary beneficiaries of this deal are the company's largest shareholders who will be able to monetize their large otherwise illiquid GeoResources' holdings.
"Additionally, management stands to gain extremely lucrative 'change of control payments' just for negotiating the proposed transaction and selling out the company's public shareholders," the complaint states.
GeoResources and Halcón are independent oil and gas companies that develope and the acquire oil and gas reserves.
The suit also names GeoResource president and CEO Frank A. Lodzinski as well as several members of the company's board and Halcón subsidiaries.
"GeoResources stockholders will receive $20.00 in cash and 1.932 shares of Halcón Resources common stock for each share of GeoResources common stock they hold, representing consideration to GeoResources stockholders of $37.97 per share based on the closing price of Halcón Resources common stock on April 24, 2012," according to the complaint, citing the press release announcing the deal. .
Last year, Geo saw a 43 percent increase in its adjusted net income over 2010 and "several analysts recently announced target price ranges for GeoResources of $39.00-$43.00."
According to the complaint, the deal includes "onerous, preclusive deal protection devices that act collectively to prevent other bidders from making successful topping bids for the company," including a $27.8 million termination fee, a no shop/no talk clause and a matching rights provision.
The suit was filed by Kip B. Shuman and Rusty E. Glenn of The Shuman Law Firm in Boulder, Colo. and Juan E. Monteverde and Shane T. Rowley of Faruqi & Faruqi LLP in New York.