In response to activist investor Carl Icahn, SandRidge Energy Inc. defended its adoption of a stockholder-rights agreement that he termed a "poison pill," saying it is not intended to hinder takeover bids or opposition to its proposed merger with Bonanza Creek Energy Inc.
In a Dec. 8 letter, SandRidge said the rights plan was adopted as "a reasonable and necessary response to a threat to the company's long-term strategic plan to maximize value for its stockholders" and reiterated that as long as a stockholder does not acquire 10% or more of the company's common stock and thus becomes an "acquiring person," the rights plan would not be triggered.
Icahn is exempted from these terms as a "grandfathered person," or a stockholder who already held more than 10% of SandRidge's common stock as of the date of the rights plan. SandRidge said Icahn's opposition to and attempts to discuss the proposed merger, as well as seeking proxies from other shareholders, calling for a special meeting, or even soliciting proxies to replace SandRidge board members would not cause him to become an acquiring person. Icahn would become an acquiring person and trigger the rights plan only if he increases his stake in the company, SandRidge said.
SandRidge also deemed Icahn's demand to inspect its books and records to be "woefully deficient in providing a credible basis of probable wrongdoing" and lacking factual support but said it is willing to provide copies of the board minutes and presentations on the Bonanza Creek deal, as well as and board minutes and materials on the rights plan, under a confidentiality agreement.
In a separate Dec. 11 news release, SandRidge listed benefits of the Bonanza Creek deal to shareholders and said it plans to file a registration statement on the strategic rationale behind the proposed merger. The company highlighted the deal's expected addition of "high-return and development-ready" assets to its Niobrara Shale position, as well as the immediate cash flow it would supply.
SandRidge on Nov. 15 announced its agreement to acquire Bonanza Creek in a $746 million deal.
SandRidge in its Dec. 11 release said it expects 15% accretion to cash flow per share in 2018, a 21% improvement in 2018 EBITDA margin per barrel of oil equivalent, and at least $20 million in annual general and administrative expense savings. The deal consideration of $36 per share is also within the per-share valuation ranges implied by Bonanza Creek's net asset value.
The company also emphasized that the rights plan "protects all of our shareholders from anyone gaining control of SandRidge without payment of a control premium ... [and] expires after one year unless terminated earlier by our shareholders at next year's annual meeting."