-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VtmLNJDlDAyGPNZYHAXLTrGEZotpfwlCdyKpVhNtnlit4Qce5u1RaEm9OkYWORs4 Q27EXoHxm3XXHQ4y37Bylg== 0000902664-06-001648.txt : 20060612 0000902664-06-001648.hdr.sgml : 20060612 20060612144832 ACCESSION NUMBER: 0000902664-06-001648 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20060612 DATE AS OF CHANGE: 20060612 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: JANA PARTNERS LLC CENTRAL INDEX KEY: 0001159159 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: JANA PARTNERS LLC STREET 2: 536 PACIFIC AVENUE CITY: SAN FRANCISCO STATE: CA ZIP: 94133 BUSINESS PHONE: 2125935955 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: HOUSTON EXPLORATION CO CENTRAL INDEX KEY: 0001015293 STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382] IRS NUMBER: 222674487 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-48519 FILM NUMBER: 06899624 BUSINESS ADDRESS: STREET 1: 1100 LOUISIANA STREET STREET 2: SUITE 2000 CITY: HOUSTON STATE: TX ZIP: 77002-5219 BUSINESS PHONE: 713-830-6800 MAIL ADDRESS: STREET 1: 1100 LOUISIANA STREET STREET 2: SUITE 2000 CITY: HOUSTON STATE: TX ZIP: 77002-5219 SC 13D/A 1 sc13da.txt JANA PARTNERS LLC - HOUSTON EXPLORATION COMPANY UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------- SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 8)* THE HOUSTON EXPLORATION COMPANY - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, $0.01 Par Value - -------------------------------------------------------------------------------- (Title of Class of Securities) 442120101 - -------------------------------------------------------------------------------- (CUSIP Number) Marc Weingarten, Esq. Schulte Roth & Zabel LLP 919 Third Avenue New York, New York 10022 (212) 756-2000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) June 12, 2006 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. [ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. (Continued on following pages) (Page 1 of 4 Pages) - -------------------------- * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). - ------------------------------ -------------------- CUSIP NO. 442120101 SCHEDULE 13D PAGE 2 OF 4 PAGES - ------------------------------ -------------------- - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) JANA PARTNERS LLC - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------- 7 SOLE VOTING POWER 3,583,600 --------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY -0- OWNED BY --------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH 3,583,600 --------------------------------------------------------- 10 SHARED DISPOSITIVE POWER -0- - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 3,583,600 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 12.3% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IA - ------------------------------------------------------------------------------- * SEE INSTRUCTIONS BEFORE FILLING OUT! - ------------------------------ -------------------- CUSIP NO. 442120101 SCHEDULE 13D PAGE 3 OF 4 PAGES - ------------------------------ -------------------- The Schedule 13D filed on February 21, 2006 by Jana Partners LLC, a Delaware limited liability company (the "Reporting Person"), relating to the shares ("Shares") of common stock, $0.01 par value, of The Houston Exploration Company (the "Issuer"), as previously amended by Amendment No. 1 to the Schedule 13D filed on April 17, 2006, Amendment No. 2 to the Schedule 13D filed on April 24, 2006, Amendment No. 3 to the Schedule 13D filed on April 28, 2006, Amendment No. 4 to the Schedule 13D filed on May 3, 2006, Amendment No. 5 to the Schedule 13D filed on May 16, 2006, Amendment No. 6 to the Schedule 13D filed on June 2, 2006 and Amendment No. 7 to the Schedule 13D filed on June 7, 2006, is hereby further amended as set forth below by this Amendment No. 8 to the Schedule 13D. Item 4. Purpose of Transaction. Item 4 of the Schedule 13D is hereby amended by the addition of the following: On June 12, 2006, the Reporting Person sent a letter to the Board (the "Offer Letter") informing the Board that the Reporting Person wishes to purchase the Issuer at a price of $62 per share. In the Offer Letter, the Reporting Person states that it believes that there is tremendous value in the Issuer that is endangered by current management, pointing to the Reporting Person's repeatedly ignored attempts to convince the Board to pursue maximum value for shareholders and concern over the possible breach of the Board's fiduciary duties and waste of corporate assets. A copy of the press release with the Offer Letter is attached hereto as Exhibit I and is incorporated herein by reference. On June 12, 2006, on behalf of the Reporting Person, the Reporting Person's counsel sent a letter to the Issuer's counsel (the "Response Letter") responding to the Issuer's counsel's response to the Reporting Person's demand for certain books and records of the Issuer (the "Demand"). In the Response Letter, the Issuer's counsel notes the Reporting Person's belief that the Issuer's response to the Demand raises significant questions and leaves unanswered many of the Reporting Person's most significant demands relating to the possible breach of the Board's fiduciary duties and waste of corporate assets. A copy of the Response Letter is attached hereto as Exhibit J and is incorporated herein by reference. Item 5. Interest in Securities of the Company. Paragraph (c) of Item 5 of the Schedule 13D is hereby amended and restated as follows: (c) There have been no transactions in the Shares effected by the Reporting Person in the past 60 days. Item 7. MATERIAL TO BE FILED AS EXHIBITS Item 7 of the Schedule 13D is hereby amended by the addition of the following: 9. Exhibit I - Press Release with the Offer Letter, dated June 12, 2006. 10. Exhibit J - Response Letter, dated June 12, 2006. - ------------------------------ -------------------- CUSIP NO. 442120101 SCHEDULE 13D PAGE 4 OF 4 PAGES - ------------------------------ -------------------- SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: June 12, 2006 JANA PARTNERS LLC By: /s/ Barry Rosenstein ------------------------------------- Name: Barry Rosenstein Title: Managing Partner By: /s/ Gary Claar ------------------------------------- Name: Gary Claar Title: Managing Director EX-99 2 exhibit99.txt JANA PARTNERS LLC - HOUSTON EXPLORATION COMPANY FOR IMMEDIATE RELEASE For more information contact JANA Partners LLC at (212) 692-7696 JANA PARTNERS LLC OFFERS TO PURCHASE THE HOUSTON EXPLORATION COMPANY FOR $62 PER SHARE NEW YORK, NEW YORK - JUNE 12, 2006 - JANA Partners LLC ("JANA") today sent an offer letter to the Board of Directors of The Houston Exploration Company (the "Company" or "Houston Exploration") proposing to purchase the Company for $62 per share. JANA, a hedge fund with over $5 billion in assets located in New York and San Francisco, currently beneficially owns 12.3% of the Company's outstanding shares. JANA noted that while its offer is subject to customary due diligence and documentation, which it believes could be completed quickly, it is not subject to any financing condition, and requested that the parties begin immediate discussions. "We believe that there is still tremendous value in Houston Exploration, but that it will continue to be destroyed as long as the Company remains in the hands of those who show far less interest in maximizing this value than they do in transferring it to the Company's management," JANA Managing Partner Barry Rosenstein wrote in today's letter. "Particularly given the Board's recent confirmation that it intends to proceed blindly ahead with demonstrably wasteful acquisitions despite the shareholder outcry this has generated, we believe action must be taken now to protect the value of our investment in the Company. Therefore, we hereby inform you that we wish to purchase the Company at a price of $62 per share in cash." JANA has previously called upon the Company to maximize shareholder value through a $650 million share repurchase and the exploration of strategic alternatives, including a sale of the Company. Mr. Rosenstein noted in today's letter that, despite having had almost three months to review JANA's detailed analysis demonstrating what it believes are the substantially higher shareholder returns this share repurchase would generate compared to new acquisitions and debt repayment, the Board has yet to substantively respond or to offer any analysis to support their stated plans. Last April, in response to the Board's silence, JANA encouraged shareholders to withhold their votes for the current directors at the Company's annual meeting. Despite the fact that JANA first did so less than one week before the meeting and despite having only a small percentage of its current ownership represented, approximately 30% of the shareholders who voted joined JANA in withholding their votes, a number which Mr. Rosenstein estimated in today's letter would currently be closer to 50% based on JANA's full ownership position, increased awareness and shareholder turnover. JANA has also questioned what it has called excessive compensation increases for Houston Exploration's management, including a compensation increase of more than 500% for Houston Exploration CEO William Hargett between 2003 and 2005, a period during which JANA has said that the Company's shares have underperformed compared to industry peers. Last week, JANA on behalf of an affiliated fund demanded access under Delaware state law to the Company's books and records, citing what it called strong indications that the Board had breached its fiduciary duties and wasted corporate assets through the payment of excessive compensation to executives and the failure to diligently pursue maximum shareholder value. Houston Exploration in response has offered to allow JANA to review a limited number of materials. Mr. Rosenstein noted today that the Company's response raises a number of questions and, more importantly, offers nothing in response to JANA's demands for information regarding what it believes is the Company's failure to pursue maximum value for shareholders. Mr. Rosenstein also noted that "it appears that the Board may have in the past rebuffed private inquiries regarding a potential acquisition of the Company at a significant premium, in which case the Board has not only failed to generate maximum value for shareholders, it has stood in the way of shareholders potentially realizing this value through a sale, thus further perpetuating the cycle of value destruction at Houston Exploration." The full text of today's offer letter from JANA to Houston Exploration's Board of Directors is attached to this release. *** ATTACHMENT: FULL TEXT OF JUNE 12, 2006 LETTER FROM JANA PARTNERS LLC TO THE BOARD OF DIRECTORS OF THE HOUSTON EXPLORATION COMPANY June 12, 2006 The Board of Directors The Houston Exploration Company 1100 Louisiana Street, Suite 2000 Houston, Texas 77002 Attention: William G. Hargett Chairman, CEO & President VIA FACSIMILE AND OVERNIGHT DELIVERY Gentlemen, JANA Partners LLC ("we" or "us") now owns 12.3% of the outstanding shares of The Houston Exploration Company (the "Company" or "Houston Exploration"). During the last few months of trying repeatedly to convince the Company's Board of Directors (the "Board") to pursue maximum value for shareholders, a clear pattern has emerged. Essentially, the harder we press the Board to deliver maximum value for shareholders, the harder it seems the Board digs in its heels in resistance. Almost three months ago we presented the Board with a detailed analysis demonstrating that using the proceeds of the recent Gulf of Mexico asset sale together with additional leverage to repurchase approximately $650 million of the Company's undervalued stock would generate significantly more value for shareholders than the Board's plans to pursue overpriced acquisitions and inefficient debt repayment. Following the Board's failure to offer any substantive response, we encouraged shareholders to withhold their vote for the Board at the Company's last annual meeting to protest. Despite the fact that we first did so only a week before the meeting and despite having only a small percentage of our current ownership represented, approximately 30% of the shareholders who voted joined us in withholding their votes, a number which we believe would be closer to 50% today based on our full ownership, increased awareness and shareholder turnover. Despite this loud and clear signal from shareholders, the Board has continued to refuse to respond substantively to our analysis or to offer their own, and has instead simply repeated its preference for pursuing the path of lesser value. More recently, we have called on the Board to explain how it can justify the massive compensation increases handed out to Company executives, including a compensation increase of more than 5 times for Chairman, CEO & President William Hargett between 2003 and 2005, when the Company's stock has vastly underperformed compared to its peers. In order to learn more about these and other matters, particularly potential breaches of fiduciary duty and corporate waste by the Board, last week we demanded access to the Company's books and records under state law. Again, the Board's response in our opinion has been insufficient, evidencing an apparent belief that alluding vaguely to pursuing shareholder value will shift attention away from excessive and unjustified transfers of shareholder value to Company executives. Finally, it appears that the Board may have in the past rebuffed private inquiries regarding a potential acquisition of the Company at a significant premium, in which case, the Board has not only failed to generate maximum value for shareholders, it has stood in the way of shareholders potentially realizing this value through a sale, thus further perpetuating the cycle of value destruction at Houston Exploration. We believe that there is still tremendous value in Houston Exploration, but that it will continue to be destroyed as long as the Company remains in the hands of those who show far less interest in maximizing this value than they do in transferring it to the Company's management. Particularly given the Board's recent confirmation that it intends to proceed blindly ahead with demonstrably wasteful acquisitions despite the shareholder outcry this has generated, we believe action must be taken now to protect the value of our investment in the Company. Therefore, we hereby inform you that we wish to purchase the Company at a price of $62 per share in cash. While our offer is subject to customary due diligence and documentation, which we believe could be completed quickly, it is not subject to any financing condition as we possess the means to fully finance it, and we are prepared to begin discussions immediately. You may reach us at (415) 989-7770. We look forward to your prompt response. Sincerely, /s/Barry Rosenstein - --------------------------------- Barry Rosenstein JANA Partners LLC Managing Partner EX-99 3 exhibit99j.txt EXHIBIT J June 12, 2006 VIA FACSIMILE and FIRST CLASS MAIL - ------------------ David J. Teklits, Esq. Morris, Nichols, Arsht & Tunnell LLP 1201 North Market Street P.O. Box 1347 Wilmington, Delaware 19899-1347 Re: Request to Inspect Books and Records of The Houston Exploration Company --------------------------------------- Dear Mr.Teklits: We are in receipt of your June 8 response (the "Response"), on behalf of The Houston Exploration Company (the "Company"), to the demand by our client, JANA Master Fund, Ltd. ("JANA"), to inspect certain books and records of the Company pursuant to Section 220 of the Delaware General Corporation Law. The Response is deficient, in that it declines to provide access to many of the books and records requested. In particular, we note that no books and records are being proffered which would shed any light on the Board's discharge of its fiduciary duty in evaluating strategic alternatives and its rationale for pursuing an acquisition strategy rather than the demonstrably superior alternative of a substantial share repurchase. Perhaps there are no such records, and if so we would appreciate your confirmation to this effect. In addition, our client is reviewing what it believes are significant questions raised by the Response, such as why the Company would characterize an office in Alabama as being a company office in its most recent 10-K but now states that this office is being paid for by Mr. Hargett. David J. Teklits, Esq. June 12, 2006 Page 2 In any event, a further reply to the Response will be forthcoming shortly. In the interest of our obtaining promptly the few documents which you have agreed to provide, we will furnish you with a draft of a customary confidentiality agreement shortly. No such agreement is necessary as a precondition to our obtaining the stockholder list information, and we will contact you to arrange for its delivery. Sincerely yours, /s/ Marc Weingarten -------------------------------- Marc Weingarten -----END PRIVACY-ENHANCED MESSAGE-----