Carl Icahn again slams SandRidge directors
Energy Editor awilmoth@oklahoman.com
Activist investor Carl Icahn on Monday challenged SandRidge Energy Inc. directors over the severance they paid to ousted CEO James Bennett.
The SandRidge board fired Bennett and former Chief Financial Officer Julian Bott in February, at the demand of Icahn and other investors. In an open letter to shareholders Monday, Icahn said the directors let Bennett “slink away with a king’s ransom in severance.”
Under terms of Bennett’s employment contract, the dismissal was considered termination without cause. Because it came less than two years after the company’s emergence from bankruptcy protection, it was considered a changein-control event, triggering a larger payout of $17.1 million. Bott received $6.5 million in severance.
“We do not believe the incumbent directors may simply hide behind ‘business judgment’ to explain away this corporate waste but rather should be required to demonstrate how their actions do not constitute gross negligence or a breach of the duties they owe to SandRidge and its stockholders,” Icahn wrote in bold, all-capitalized letters.
SandRidge directors Monday added two slides to an investor presentation the company released last week.
The new slides address Icahn’s accusations about Bennett’s severance, along with other complaints.
“Your board found no legal basis for terminating Mr. Bennett for cause; had the board withheld severance, as Icahn advocated, SandRidge could have been liable under Oklahoma law for unpaid wages and additional, liquidated damages, potentially doubling the amount owed,” the directors stated.
The directors also pointed out that they were not involved in developing or adopting Bennett’s contract, which was approved by the company’s previous board before SandRidge emerged from bankruptcy protection. All current SandRidge directors joined the board after the company’s emergence from bankruptcy.
“Despite having no involvement in their creation, our board has been bound by the legacy employment agreements — assumed under the plan of reorganization and approved by the company’s creditors — that established minimum levels of compensation and severance payments,” the directors stated in Monday’s presentation.
Monday’s dueling announcements continue a series of filings and news releases submitted by the SandRidge board and Icahn, the company’s largest shareholder, over the past several weeks.
Icahn has called for shareholders to reject the entire board, instead replacing the five directors with a full slate of seven directors of his choosing. The SandRidge board has asked shareholders to reelect the five incumbent directors and support two of Icahn’s nominees, John J. “Jack” Lipinski and Randolph C. Read.
The vote is set to take place at the company’s annual meeting at 9 a.m. June 19 at SandRidge’s Oklahoma City headquarters.
Along with criticism of the severance package, Icahn on Monday repeated his complaints that the SandRidge directors last year approved the plan to purchase Colorado-based Bonanza Creek Energy. The company in December withdrew the offer, following Icahn’s complaints.
Icahn on Monday also again criticized the directors’ use of a “poison pill” to limit his ability to control the company.
A “poison pill” is a tactic used to prevent or discourage hostile takeovers. The strategy decreases the price of a company’s stock, making it unfavorable to the acquiring firm.
“We believe the actions outlined above demonstrate what little regard the board has for stockholders,” Icahn stated in Monday’s letter.
“The incumbent directors are reminiscent of Keystone Cops [sic] with one discernible skill: they have proven to be quite adept at delivering extravagant stock holder funded gifts to bankers and lawyers for advising on failed deals and concocting devilish schemes to disenfranchise the company’s owners and to former executives for driving SandRidge into bankruptcy and erasing billions of dollars in equity value,” Icahn stated.
SandRidge directors said they have listened and responded to shareholder concerns and that they have led the company in a new strategic direction following bankruptcy emergence. The directors said they have cut costs and begun a plan to better develop the company’s oil and natural gas reserves
SandRidge directors have said Icahn is trying to take over the board so he can bypass the company’s ongoing effort to solicit and evaluate third-party offers to buy or partner with the company.
“Icahn’s agenda is clear — it is seeking to gain control of SandRidge without paying an appropriate premium in order to preserve further upside only for itself,” the directors said in this week’s investor presentation.