The Oklahoman

Carl Icahn calls SandRidge actions ‘complete travesty’

- BY ADAM WILMOTH Energy Editor awilmoth@oklahoman.com

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.

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