Carl Icahn’s Letter to the Board of SandRidge Energy: Moving Beyond the Bonanza Debacle


Carl C. Icahn’s Open Letter to the Board of Directors of SandRidge Energy: Moving Beyond the Bonanza Debacle, January 9, 2018

  • Obviously pleased that you made the wise choice to terminate the Bonanza merger agreement but still have concerns about many of the things this board has permitted to happen at SandRidge
  • Current directors were remiss in attempting to ram through a dilutive, overpriced and value-destroying acquisition without at the very least reaching out and discussing this with company’s shareholders
    • This was especially insulting considering management’s post-bankruptcy promises to protect the balance sheet, reduce operating costs, generate FCF and develop significant remaining inventory in the Northwest Stack and North Park Basin in a disciplined manner
    • We believe the primary effect of the deal would have been to entrench yourselves at the expense of shareholders
  • We question why you refuse to hold James Bennett accountable for his history with SandRidge during a period of massive value destruction, including an ill-advised acquisition binge, a bankruptcy filing, Bennett presiding over a $90 million payout to the former CEO, and taking over $50 million in compensation for himself, all while the shareholders suffered
  • Your attempt to entrench yourselves by adopting an unorthodox poison pill intended to prevent large shareholders from talking with one another to oppose the Bonanza acquisition would make a totalitarian dictator blush
    • We cannot recall another situation where a board has gone to such lengths to completely eviscerate shareholder rights
  • As we discussed preliminarily with Mr. Bennett last week, believe the following changes must be instituted immediately:
    • 2 of the 5 members of the board must resign and be replaced by new directors to be designated by shareholders. As SandRidge’s largest shareholder, we would expect to designate one of the new directors
    • SandRidge must agree that going forward any new extraordinary transactions as well as any material changes to the company’s compensation arrangements must be approved by a super-majority vote of the board
    • According to SandRidge’s own disclosure, the board purportedly adopted the poison pill to comply with the company’s obligations under the merger agreement with Bonanza and the pill was designed to protect shareholders’ right to vote on the associated share issuance proposal. Since the merger agreement has been terminated and the share issuance proposal has been abandoned, it stands to reason that SandRidge must now terminate the pill. If the board nevertheless insists on keeping the posion pill in place through the upcoming annual meeting of shareholders, then at the very least the pill must be amended to delete the “Acting in Concert” provision and to increase the trigger threshold from 10% to 25%
      • As you may already suspect, it is a virtual certainty that the pill will be voted down in its entirety at the annual meeting in any event, so making these modest changes should be a no-brainer

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