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SandRidge rejects Midstates' merger offer, says open to other deals

SandRidge Energy Inc.'s board of directors has rejected a $564 million all-stock merger offer from Midstates Petroleum Co. Inc., but it said SandRidge is effectively on the market.

In a statement released after hours on March 19, SandRidge said a merger with Midstates would create "meaningful synergies," but the offer was insufficient given SandRidge's asset base.

"After extensive analysis, SandRidge has concluded that the relative asset values of the two companies do not support a combination effected at current stock prices," the company said. "The decision was primarily based on significantly differing opinions of Midstates' proven oil and gas reserves, largely related to the assessment of the number of economically viable drilling locations at current oil and gas prices."

SandRidge said it did not support Midstates' estimate that a combined business plan would create a company with generally flat production and free cash flow between $320 million and $400 million between 2019 and 2022. It said the deal overall was "not in the best long-term interests of SandRidge stockholders."

Some of those stockholders might disagree. Midstates' largest shareholder, Fir Tree Partners, also holds an 8% stake in SandRidge and has indicated support for the proposed merger.

During the process of discussing a possible merger with Midstates, SandRidge said it received interest from other companies interested in "alternative transactions." As a result, the company said it is starting a "formal process" to look at other alternatives, which could include "potential corporate and asset combinations."

"In light of ongoing feedback from shareholders and several expressions of interest we have recently received, we have decided to engage advisors to solicit third-party proposals and assist in evaluating all strategic options available to the company," interim CEO Bill Griffin said. "While we evaluate strategic alternatives, we will remain focused on efficiently running our business."