Oklahoma City-based SandRidge Energy Inc. said it has 17 confidentiality agreements with potential bidders in hand for the company, but it also warned shareholders they were being misled by billionaire hedge fund activist Carl Icahn, who also bidding to control the company.
The board updated its ongoing strategic review process ahead of the annual meeting, which is scheduled for Tuesday (June 19). Each of the 17 potential counterparties, including Icahn, have access to the company’s virtual data room to conduct a due diligence review.
“Management presentations with these potential counterparties have been made and continue to be scheduled,” the board said in its letter to shareholders.
The independent, which emerged from bankruptcy in 2016, last November set its cap to purchase onshore producer Bonanza Creek Energy Inc., but the plan was quickly turned back after Icahn swooped in, becoming the largest shareholder.
The board noted in its letter that for more than a month, it has been negotiating a buyout by Midstates Petroleum Co. Inc., which had first proposed a merger in February. Tulsa-based Midstates “has been offered a form of confidentiality agreement with terms more favorable than any other participant,” the board said. However, so far, “Midstates continues to reject both reasonable terms of nondisclosure and participation in the process.”
However, Midstates on Friday said some of the SandRidge claims were inaccurate. “While SandRidge has offered a nondisclosure agreement (NDA) to Midstates, it would require Midstates to enter into a standstill, which is an unusual requirement for a party that has made a public offer. Furthermore, SandRidge has informed Midstates that it will not provide Midstates with internal forecasts that it is providing other process participants even if Midstates were to sign the NDA offered by SandRidge.
“Also, in a June 4, 2018 filing, SandRidge made the claim that ‘SandRidge sought to engage in negotiations with Midstates regarding the proposal, but was rebuffed.’ Although Midstates encouraged SandRidge to make a counteroffer to our proposal, SandRidge refused and rejected our offer.”
Potential counterparties have until June 25 to submit their indications of interest in SandRidge. The board also chastised Icahn, who became the largest shareholder last year, and said it was “setting the record straight” regarding his“ongoing efforts to mislead investors.”
Icahn has led a “continued campaign of misinformation,” but “our strategic review process is robust and thorough and we continue to welcome all interested parties to participate.”
Calling it an “unnecessary and avoidable fight,” the board said “Icahn's objective has been clear: he is seeking to place his interests above those of other SandRidge shareholders. If Icahn gets his way by seizing control of, or placing his nonindependent nominees on the goard, he will be in a position to simultaneously run and bid for the company -- putting his interests ahead of other shareholders.”
Icahn’s “inherent conflict of interest has been clearly noted” by independent proxy advisory firms Institutional Shareholder Services Inc. and Glass, Lewis & Co., the board said.
Shareholders were urged vote for the board’s five director nominees as well as two independent Icahn nominees. If elected, the two Icahn directors would “represent almost 30% of the expanded board, which is well in excess of Carl Icahn's 13.6% ownership, and will ensure that new perspectives will be added to the strategic review process.”