Sandell wants solid post-closing plan from Plains Exploration

By Lisa Kerner

Charlotte, N.C., Oct. 19 - Plains Exploration and Production Co. investor Sandell Asset Management Corp. said that while it is "inclined to support" a transaction with Pogo Producing Co., the 5.1% stakeholder is "concerned by Plains' management's inability to provide a strategic plan for the combined company post-closing," according to a Sandell news release.

It was previously reported that Plains and Pogo agreed to merge in a stock and cash transaction worth an estimated $3.6 billion. Total consideration for outstanding Pogo shares is 40 million Plains shares and some $1.5 billion in cash.

Sandell made its feeling known in a letter to Plains chairman, president and chief executive officer James Flores. The letter was also included in a schedule 13D filing with the Securities and Exchange Commission.

The investor blamed Plains' recent underperformance on confusion in the market about the company post-closing, including a timetable for assets sales and the formation of a master limited partnership.

In the letter, Sandell insisted that Plains provide a post-closing plan and take the following actions immediately following the transaction's close:

• Prepare for an asset sale in the fourth quarter with proceeds used for share repurchases;

• Create a master limited partnership for all of the reserves in California and the Piceance basin; and

• Continue to repurchase shares.

"Plains is an excellent company and has historically created a lot of value for investors," Sandell CEO Thomas E. Sandell said in the release.

"We believe that management has an opportunity to create significant value for investors of up to $90 per share, but that this value can only be accomplished through aggressive execution of the actions we have recommended," Sandell added.

Plains is a Houston-based independent oil and gas company. Pogo, also located in Houston, is a natural gas production and exploration company.

Sandell is a New York-based investment management firm.

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