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SandRidge might be forced to hold change-of-control tender offer
By Angela McDaniels
Tacoma, Wash., Jan. 18 - SandRidge Energy, Inc. warned that its proxy fight with an investor group could result in a change of control that would require it to offer to buy back more than $4.3 billion of its senior notes.
TPG-Axon Group is trying to replace all members of the company's board with its own nominees. If successful, the plan could constitute a change of control, and the resulting requirement to hold a tender offer could be "materially harmful" to the company, SandRidge said in a news release.
TPG-Axon owns 6.7% of the company's common stock. In its consent solicitation, the group said that SandRidge's stock has declined by almost 80% since its initial public offering in 2007 and blamed this "destruction of stockholder value" on "poor and erratic strategic decisions, excessive spending and self-interested transactions."
In its news release, SandRidge said it has undertaken a number of initiatives to improve its liquidity and overall financial strength.
"In particular, the announced sale of our mature Permian assets for $2.6 billion will generate cash proceeds of over $1.4 billion in excess of our net investment, dramatically reduce our net debt balances and give us the resources needed to fund our growth" in the Mississippian Lime play of northern Oklahoma and western Kansas, the release stated.
SandRidge said it has reduced its ratio of net debt to EBITDA to 3.2 times at Sept. 30 from 4.6 times a year earlier and expects to reduce the ratio to under 2 times with the proceeds of the Permian Basin sale.
In addition, the company believes that the TPG-Axon nominees would "immediately encourage and facilitate a major restructuring or a premature sale of SandRidge designed to benefit short-term investors."
SandRidge is an oil and natural gas company based in Oklahoma City.
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