A hedge fund has offered to buy a large gas driller at the centre of a legal dispute in which a Middle Eastern sovereign wealth fund accused a US private equity group of self-dealing.
Mason Capital has offered to buy Ascent Resources in a potential multibillion-dollar takeover that would sidestep the company’s controversial sale between two funds managed by its private equity backer, Energy & Minerals Group. Ascent Resources is one of the largest privately held natural gas drillers in North America.
Earlier this month, the Abu Dhabi Investment Council sovereign wealth fund sued Energy & Minerals Group to block the Houston-based private equity fund from selling its more-than 30 per cent stake in the driller between two funds it manages.
The sovereign fund accused EMG of selling Ascent using a so-called continuation fund in a deal that would short-change investors, but create a financial windfall for EMG.
Abu Dhabi Investment Council also argued that EMG had sought to coerce investors to support the fund-to-fund transfer by minimising Ascent’s prospects of being sold to an outside buyer or go public. EMG agreed to halt the transaction while the battle is arbitrated in a Delaware court.
Mason Capital, a $2bn fund that makes distressed investments and long/short equity trades, is an existing investor in Ascent Resources after having built a stake in the driller through its 2018 bankruptcy.
It is now using its preliminary offer to force EMG to initiate a full sale process. The New York hedge fund says it is willing to pay a premium to the valuation of EMG’s mooted fund-to-fund deal and make its purchase without any deferrals.
“Mason Capital is prepared to evaluate and, if supported by a proper governance process and customary confirmatory diligence, deliver a fully financed, all-cash proposal to acquire all outstanding units . . . at a price superior to that contemplated by the EMG transactions,” it said in a letter sent to Ascent’s board of directors obtained by the Financial Times.
In the letter, Mason also said it hoped Ascent would initiate a formal sale process that included a 45-day period in which its board would seek higher alternatives to the hedge fund’s potential offer, “thereby ensuring that the company pursues the most value-maximising path for all members”.
Mason Capital declined to comment. Abu Dhabi’s fund declined to comment on matters subject to ongoing litigation. Ascent Resources did not immediately respond to a message seeking comment.
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