Carl Icahn last week ripped SandRidge Energy for adopting a poison pill strategy the billionaire activist investor said is designed to quash dissent from shareholders opposed to the company’s purchase of fellow driller Bonanza Creek Resources.
“This makes a banana republic look good,” he told CNBC’s “Fast Money: Haltime Report.”
In a letter to SandRidge on Thursday (reviewed by Kallanish Energy), Icahn called the nearly $746 million deal, announced Nov. 15, “dilutive, overpriced and value-destroying.” He seconded the opinion of fellow SandRidge investor Fir Tree Partners as saying “the proposed acquisition of Bonanza makes no economic or strategic sense.”
Icahn holds a 13.5% stake in SandRidge, making it the largest single shareholder.
Last Monday, SandRidge’s board of directors adopted a shareholder rights plan, aka, poison pill, that would block any individual or group from amassing a 10% stake in its common stock. It would also prevent big shareholders holding 10% or more of SandRidge’s outstanding shares — which only is Icahn — from buying more shares.
“On Nov. 26, 2017, in direct response to this strong shareholder opposition to the proposed acquisition, you (the SandRidge board) adopted a poison pill that is a complete travesty and represents a new low in corporate governance,” Icahn wrote in his letter to the board.
“The pill contains an especially noxious provision whereby the members of the board may, for whatever undefined reasons you may determine, “deem” large shareholders to be “acting in concert” with other shareholders – even if they have never met or spoken with one another – thereby triggering the massively dilutive consequences of the pill.”
Icahn wrote he feels this provision is “patently absurd and we believe unenforceable” because it is a transparent attempt to preclude large shareholders from communicating with one another and exercising their rights as shareholders.
Icahn told CNBC while he takes issue with the Bonanza buyout and the performance of SandRidge CEO James Bennett, that provision is what convinced him to go after the company.
In a press release announcing the poison pill, John Genova, chairman of the SandRidge board, said, “Today’s actions are designed to protect the interests of all of our shareholders and preserve their ability to fully consider all information related to the proposed Bonanza Creek merger … .”