Blackstone's EagleClaw Midstream sues Caprock over troubled deal

(Reuters) – Private-equity backed EagleClaw Midstream is suing the former owners of Caprock Midstream, alleging they failed to disclose tens of millions of dollars of liabilities during acquisition talks.

EagleClaw in 2018 acquired natural gas pipeline operator Caprock Midstream Holdings from Energy Spectrum Capital and Caprock Midstream Management for $950 million. After the deal closed, EagleClaw discovered “numerous issues and claims for liabilities” with the pipeline assets, according to a lawsuit filed in a Texas court in Houston.

The largest amount was a $22 million bill presented after the close by Cimarex Energy Co (XEC.N) from an audit of a gas gathering, water handling and electrical services agreements, the suit claimed. EagleClaw is owned by private equity firms Blackstone Capital Partners and I Squared Capital.

EagleClaw would not have completed the deal without obligating Caprock to defend those claims had it been aware of the audit, according to the lawsuit. Representatives for EagleClaw did not immediately respond to a request for comment.

Caprock and Energy Spectrum Capital could not immediately be reached for comment.

Blackstone and I Squared did not immediately reply to requests for comment.

A Cimarex spokesman had no immediate comment.

EagleClaw’s suit seeks undisclosed damages for breach of contract and access to $4.75 million held in an escrow account.

The company said it also expects to incur $4 million in costs to fix “severe corrosion” in a gas pipeline it claimed had defective joints, and $600,000 to repair a natural gas processing plant in Texas that suffered shutdowns.

The case is Eagleclaw Midstream Ventures v Caprock Midstream, Harris County District Court, 2020-31025.

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WeWork committee pushes back against SoftBank, defends right to represent shareholders

(Reuters) – A special committee of WeWork board members on Monday rejected an assertion by SoftBank Group Corp (9984.T) that it does not have authority to represent the interests of minority shareholders of the office-sharing startup.

The committee had negotiated a $3 billion tender offer which was part of a $9.6 billion rescue financing package SoftBank had agreed with WeWork in October that gave it control of the company.

Since then, the office space-sharing start-up’s occupancy rates have plummeted, as customers in big cities stay at home to prevent the spread of the coronavirus.

SoftBank earlier this month said it would not press ahead with the tender offer because several pre-conditions had not been met, frustrating WeWork’s minority shareholders, who were expecting a payout. The investors included co-founder and former Chief Executive Officer Adam Neumann.

An independent two-member special committee of WeWork had filed a lawsuit, calling SoftBank’s decision to terminate the tender offer wrongful.

“SoftBank’s ploy attempts to prevent the more than 850 current and former WeWork employees who tendered stock worth over $450 million from obtaining any remedy for SoftBank’s wrongful conduct,” the committee said in a statement.

The committee comprises Bruce Dunlevie, who is a general partner at WeWork shareholder Benchmark Capital, and Lew Frankfort, former CEO of luxury handbag maker Coach.

“The present complaint reflects an effort by two directors to use WeWork’s resources to pursue a lawsuit designed to create a personal benefit for the directors who brought it. That is improper,” a spokeswoman for SoftBank said.

SoftBank has so far invested more than $13.5 billion in WeWork. In two previous tender offers in 2017 and 2019, WeWork shareholders and employees had received a total of $2.3 billion from SoftBank.

But the conglomerate has been under growing financial strain, with souring tech bets bringing it under pressure from activist investor Elliott Management and pushing it into a radical pledge to raise $41 billion by selling down core assets for share buybacks and to reduce debt.

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