Plaintiffs in a new class-action suit claim that the financial advisers hired to oversee a proposed merger of oil and gas companies Forest Oil and Sabine Oil & Gas did not have the best interests of shareholders in mind when approving the merger. The suit was filed by Randall Edwards against Forest Oil, seven of its corporate officers, and Sabine Oil & Gas in New York County, New York.
Edwards alleges that the Forest board hired J.P. Morgan Securities as its financial adviser improperly as it potentially would have created an alliance between J.P. Morgan and interested members of Forest’s management rather than the Board or the company’s shareholders. Simultaneously, Sabine retained Wells Fargo, one of Forest’s biggest lenders, as its financial adviser. Wells Fargo thus allegedly has special knowledge of Forest’s operations and influence over Forest to accept a deal less favorable to its shareholders. Edwards further claims that while Sabine has more reserves than Forest, a substantially greater percentage of those reserves are undeveloped, requiring massive amounts of capital to develop and, therefore, making Sabine an extremely risky investment opportunity.
Forest and Sabine announced the merger earlier this month that would have combined substantial oil and gas holdings in East Texas. Forest shareholders would own 26.5% of the new Sabine, and the new Sabine board would include two members of Forest’s board. As a privately owned company, Sabine and its CEO declined to provide a value for the acquisition. Forest had been in financial trouble for a number of years, consistently selling its assets to reduce its debt, and its share price has risen 30% since the announcement of the merger.
If you or someone you know has lost money as a result of an investment, please contact Richard Frankowski at 888-390-0036 to discuss your potential legal remedies.