Carl Icahn calls SandRidge actions ‘complete travesty’
Carl Icahn on Thursday blasted SandRidge Energy Corp. directors for actions he described as a “complete travesty” that “represents a new low in corporate governance.”
The activist investor and SandRidge’s largest shareholder sent the strongly worded letter to SandRidge directors and filed it with federal regulators Thursday, four days after the board adopted a shareholder rights agreement — commonly known as a poison pill — designed to limit the influence of activist investors.
“Even more egregious is the fact that, while forcing large shareholders to remain silent and not allowing them to communicate with other shareholders, the (poison) pill explicitly allows the board and management to communicate with shareholders to attempt to persuade them of the merits of the transaction,” Icahn wrote in the letter.
“Such actions would make a totalitarian dictator blush, yet you take them with a straight face and misrepresent the intentions of the pill by describing it as a ‘shareholder rights plan.’ We are not aware of a more insulting euphemism.”
SandRidge directors adopted the plan Monday, five days after Icahn announced that he and his companies had acquired a 13.5 percent stake in the company. Icahn and other SandRidge investors have challenged the company’s plan announced Nov. 15 to buy Denver-based Bonanza Creek Energy in a cash
and stock deal worth $746 million.
SandRidge defends proposal
SandRidge executives on Thursday again defended the proposed Bonanza Creek purchase.
“Our independent board thoroughly evaluated and unanimously supports the Bonanza Creek transaction,” the company said in a statement Thursday. “We look forward to filing our proxy materials before year end, which will give shareholders the ability to fully review the merits of the transaction.”
SandRidge directors and executives have said the Bonanza Creek purchase will boost the company’s production and profits.
“This acquisition greatly enhances our existing portfolio by adding a deep inventory of drill-ready locations in the DJ Basin of Colorado and is highly complementary to our existing North Park, Northwest STACK and Mississippian assets,” SandRidge CEO James Bennett said in a Nov. 15 statement announcing the plan.
“The geological and operational characteristics of Bonanza’s Niobrara and Codell locations are analogous to our existing Colorado North Park assets, and we expect to benefit from the expertise of their teams.
Overall, we believe this will drive strong risk-adjusted returns in both areas.”
Icahn, however, said the effort would cause the company to take on too much debt and “would be extremely value destructive to shareholder value.”
SandRidge directors on Monday said the poison pill would be triggered if an investor acquires a 10 percent stake in the company. Icahn was grandfathered in, but the plan would take effect if he attempts to increase his stake in SandRidge.
Icahn criticizes poison pill
Icahn on Thursday said the plan is designed to limit the ability of himself and other shareholders to challenge the Bonanza purchase. The plan could be triggered if SandRidge directors deem large shareholders to be “acting in concert” with other shareholders.
“First you promised shareholders that they would have the right to vote on whether they wanted to be diluted by the insane Bonanza acquisition. Now you have decided in your infinite wisdom that only you should be allowed to communicate with shareholders regarding the transaction,” the letter states. “If large shareholders attempt to communicate with one another to oppose the transaction, they risk triggering the pill and suffering dilution
infinitely worse than that promised by the Bonanza transaction.”
Icahn has a long history of shareholder activism, including at Oklahoma City companies Chesapeake Energy Corp. and the former Kerr-McGee Corp. He also has invested in and challenged companies worldwide.
“In all that time, I have never seen transgressions against shareholder rights as bad as those the SandRidge board is now perpetrating,” Icahn stated in the letter. “Your apparent disregard for any semblance of accountability to the owners of SandRidge reminds me of the medieval belief in the divine right of kings.”
Icahn said he has “no current plans” to file proposals or take action against the SandRidge board, but he said he and his companies “are considering all our options.”
“We are frankly frightened that more value destruction may be in store if shareholders do not revolt against this oppression,” Icahn said in the letter.
The investor concluded the letter by threatening to sue the SandRidge directors if they didn’t allow shareholders to “properly communicate with each other” or if they do not respond to his questions about the purpose of the poison pill.
SandRidge shares gained 50 cents, or 2.8 percent, Thursday to $18.61 a share.