Carl Icahn Buys 13% Stake in SandRidge Energy
The investor joins other shareholders who are against SandRidge’s proposed acquisition of Bonanza Creek
Carl Icahn has purchased at least 13% of SandRidge Energy Inc., SD 5.29% according to people familiar with the matter, joining a list of shareholders who say a deal the oil-and-gas producer struck last week makes little sense.
The stake, Mr. Icahn’s first new activist position this year, makes him the biggest holder of SandRidge shares. He had already been buying on the belief they were cheap, but scooped up millions more in the wake of the announcement that SandRidge would buy Bonanza Creek Energy Inc. BCEI 1.45% for about $750 million, the people said.
Like the other investors, Mr. Icahn believes the Bonzana Creek deal echoes a prior ill-fated acquisition binge at the company, the people added. The investors, which include Fir Tree Partners, also question the quality of Bonanza Creek’s properties, argue the price is too high and complain SandRidge is using undervalued stock to pay for the acquisition.
The investors say they expected SandRidge to run a disciplined oil-and-gas producer in Oklahoma and Colorado, not strike big deals.
SandRidge’s stock tumbled as much as 20% the day the Bonanza Creek deal was announced, and as of Wednesday afternoon remained down even amid the heavy buying of Mr. Icahn and some others. As of Wednesday’s close, the shares had dropped 26% this year, giving the Oklahoma City company a market value just shy of $600 million.
“We take our stockholders’ thoughts and concerns seriously and look forward to the opportunity to further engage on this matter in the coming weeks,” said SandRidge spokesman David Kimmel.
SandRidge Chief Executive James Bennett told analysts last week that the combination “creates a more balanced portfolio” of mature drilling fields in Arkansas and Oklahoma that can help generate cash to fund development. It would also give SandRidge more exposure to oil, as opposed to natural gas, add drilling locations that offer higher returns and produce cost savings while boosting the company’s purchasing power, he said.
The famed activist investor’s presence will likely escalate the pressure on Mr. Bennett, who took over the company in 2013 when a heated investor fight felled his predecessor, founder Tom Ward. SandRidge filed for bankruptcy in May 2016 amid falling oil-and-gas prices and hefty debts the company piled up while attempting to find a sustainable strategy. It emerged in October 2016, with Mr. Bennett still at the helm.
Fir Tree, which holds about a 7% stake, blasted the proposed Bonanza Creek deal in a public letter on Monday. Susquehanna Investment Group LLC and Cannell Capital LLC, which own over 4% and 1.5%, respectively, have also said they oppose it.
“Put simply, the proposed acquisition of Bonanza makes no economic or strategic sense,” Fir Tree wrote.
Because of the stock issuance it involves, the Bonanza Creek deal would require a vote of SandRidge holders.
SandRidge was started in 2006 by Mr. Ward, who had earlier founded Chesapeake Energy Co. with famed wildcatter Aubrey McClendon. SandRidge was quickly worth more than $11 billion, but its value plummeted in the financial crisis.
A series of controversial deals, culminating with one in 2012 involving Gulf of Mexico oil fields, attracted activist investors who called for Mr. Ward’s ouster. He landed a severance package worth roughly $90 million.
Though Mr. Icahn wasn’t part of the original fight with SandRidge, he does have a history with the company, having booked a sizable profit when he sold Mr. Ward some small companies. The investor has long been involved with energy stocks, helping oust Mr. McClendon from Chesapeake for example.