Icahn, SandRidge exchange final barbs before vote
SandRidge Energy traded last-minute barbs with activist investor Carl Icahn in regulatory filings Monday, a day before election results will be tallied that will reconfigure the company’s board of directors as part of a process to send the company in a new direction.
SandRidge’s filing involved a news release it issued that accused Icahn of attempting to gain complete control of the company by encouraging shareholders to reallocate votes from candidates recommended by two proxy firms to candidates who aren’t.
“In what can only be described as a material omission, Icahn has not divulged that doing so may ... give Icahn control of the board,” the release stated.
The other filing involved an open letter Icahn released to shareholders Monday urging them to vote for all seven of his nominees, citing the company’s declining stock price since its emergence from bankruptcy and its hedging policy for oil produced so far this year as reasons to make the change.
“While it may be only fair to blame the three longest tenured members of the board for this atrocious performance, the two newest members seem perfectly happy to be painted with the same brush, proclaiming publicly, in a remarkably tone-deaf statement, that they are ‘proud of the results’ that SandRidge delivered during this period,” the letter stated.
SandRidge has asked shareholders to re-elect incumbent members Sylvia K. Barnes, Kenneth H. Beer, Michael L. Bennett, William M. Griffin and David J. Kornder to the
board, and to elect Icahn nominees Randolph Read and John Lipinski to vacant positions it created to address the investor’s concerns.
Advisory firms Glass, Lewis & Co. and Institutional Shareholder Services Inc. (ISS) both recommend that SandRidge shareholders re-elect four incumbent SandRidge directors (dropping Beer).
Both also recommend choosing three Icahn nominees to the remaining positions, a move that would allow the incumbents to retain control of the board but also give Icahn significant influence.
The two firms both endorse Lipinski and Read, but ISS recommends shareholders choose Jonathan Christodoro as a third Icahn nominee while Glass Lewis recommends Bob Alexander.
One of the newly elected board’s first duties will be to consider offers by third-party companies to buy or partner with SandRidge to develop its oil and natural acreage.
The election results will be announced at SandRidge’s annual meeting Tuesday in Oklahoma City. The meeting is being held just weeks after SandRidge announced a $41 million first-quarter loss, brought on in part by declining production and expenses related to layoffs and the firings of two top executives.
“Icahn’s clear objective is to manipulate the election by diluting the votes between SandRidge candidates to help his nominees gain a majority control position,” SandRidge’s release stated. “That may be good for him, but we believe it would have terrible unintended consequences for SandRidge shareholders.”
Icahn’s letter, meanwhile, recapped his various concerns with the firm, including its proposed Bonanza Creek Energy acquisition that activist investors rejected and its creation of a poison pill that would require any entity acquiring 10 percent or more of the company’s stock to adequately compensate other shareholders as part of the deal (a step the board took after Icahn, who was grandfathered in as a shareholder, announced he had acquired more than 13 percent of SandRidge’s outstanding shares).
It also criticized SandRidge’s payoff to former CEO James Bennett when it released him without cause, its rejection of Midstates Petroleum Co.’s offer to acquire the company, and its ongoing strategic review.
“We believe much more will be discovered once our director nominees are elected on Tuesday and ... can review the company’s books and records from the inside,” Icahn’s letter stated.
“We cannot promise that our slate will be able to wave a magic wand and eliminate overnight the overhang that the incumbent directors have placed on the stock. However, we are completely confident that they will work tirelessly to seek to increase shareholder value in a conflict-free manner.”
On Monday, SandRidge’s shares ended trading up 23 cents, closing at $15.84. The company’s annual meeting will be at 9 a.m. at SandRidge’s Oklahoma City headquarters.