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SandRidge Energy gets merger proposal from Midstates Petroleum

On the heels of a merger deal scuttled by shareholder activism, SandRidge Energy Inc. received a proposal from rival exploration and production company Midstates Petroleum Co. Inc. for an all-stock merger that could result in a combined company with a market capitalization of about $1 billion.

Under the proposal, 60% of the combined company would be held by SandRidge shareholders and the rest would be owned by Midstates shareholders. SandRidge shareholders would stand to receive 1.068 Midstates shares for each SandRidge share they own, an exchange ratio based on closing share prices as of Feb. 5.

In a Feb. 6 letter to SandRidge's board, Midstates said the combination is expected to result in $400 million to $480 million of cumulative free cash flow through 2022, more than $70 million in annual synergies and an additional $15 million of estimated CapEx synergies. The two companies also have complementary assets in the Mississippian Lime and STACK plays in Oklahoma, Midstates said.

The combined company would be led by Midstates President and CEO David Sambrooks. Midstates' largest shareholders, Fir Tree Partners and Avenue Capital Group LLC, expressed support for the deal. Fir Tree Partners, which opposed the terminated merger between SandRidge and Bonanza Creek Energy Inc., also owns more than 8% of SandRidge stock.

Midstates is aiming to close the deal by the second quarter.