Shareholders block SandRidge purchase of drill-ready acres
SandRidge Energy Inc. on Thursday canceled its plans to buy Colorado-based Bonanza Creek Energy following strong opposition by the company’s largest shareholders.
SandRdige announced the $746 million purchase plan last month. The effort drew swift challenges from activist investor Carl Icahn and New York-based Fir Tree Partners, SandRidge’s two largest shareholders.
“After consultation with SandRidge’s largest shareholders, it became clear that the company would not receive approval for the transaction at the planned special meeting,” SandRidge said in a statement Thursday. “After careful consideration, the decision was unanimously approved by the company’s board of directors and an agreement was reached with Bonanza Creek to mutually terminate the merger agreement.”
As part of the termination agreement, SandRidge agreed to pay Bonanza Creek up to $3.7 million to reimburse it for transaction-related expenses.
SandRidge executives said the purchase of 67,000 contiguous net acres in Colorado’s DJ Basin would have boosted SandRidge’s oil production and quickly expanded its possible drilling locations.
“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 statement when
announcing the proposed deal last month.
Opposition and criticism
The purchase deal was strongly opposed by SandRidge’s two largest shareholders: Icahn and Fir Tree Partners. Icahn and his companies control 13.5 percent of SandRidge stock, and Fir Tree holds another 8.3 percent.
Both groups challenged SandRidge’s plan to pay for the deal by taking on debt and issuing new stock, and both groups have issued statements urging SandRidge shareholders to oppose the purchase plan.
Icahn last week filed a proxy statement, asking shareholders to vote against the plan. He updated the proxy request on Wednesday.
Besides expressing opposition to the Bonanza Creek deal, the 27-page document also challenges SandRidge’s executive compensation. Icahn pointed out that 18 peer companies all have much larger market capitalization and much lower CEO compensation.
“The participants also believe there is substantial misalignment of interest between management of SandRidge and its stockholders,” Icahn said in the proxy filing. “The participants believe that management compensation, in particular the compensation of the chief executive officer of the company, is significantly disproportionate to the size and scale of the company and its operations and compensation paid to executives of peer companies.
“The participants are therefore concerned that management has an incentive to support and seek out transactions, such as the proposed merger, that allow them to maintain their positions at a company with increased size, which may more easily justify the company’s compensation practices, notwithstanding that such transactions are not in the best interest of the stockholders of the company.”