December 29, 2017 / 8:39 PM / 23 days ago

Breakingviews - Icahn wins SandRidge battle but war isn’t over

DALLAS (Reuters Breakingviews) - Carl Icahn has won his first battle with SandRidge Energy, but the war is not yet over. The oil driller has dropped its $746 million bid for rival Bonanza Creek Energy, something the activist and others wanted. But its poison pill – which bars Icahn from upping his stake and makes a takeover more difficult – remains in place.

The climbdown came just six weeks after SandRidge announced its agreed offer for Bonanza, a quick retreat that underscored the depth of shareholder opposition. Fir Tree Partners, the company’s third-largest shareholder, first challenged the deal. Icahn joined them shortly after. Guggenheim Partners Investment Management later sided with both investors, making all three top shareholders vocal opponents.

SandRidge’s stock, up more than 6 percent in early afternoon trading Friday, reflected their approval. Still the shareholders’ work isn’t done. After Icahn took his stake, the company adopted a poison pill that effectively dilutes any shareholder if they take big stakes. These types of rights plans, as they are called, can put off potential bidders too.

SandRidge stock trades at just 2.4 times estimated earnings before interest, tax, depreciation and amortization for 2018, according to Eikon, less than half the multiples of most rivals. That could leave the company ripe for a takeover. Shareholders will have the opportunity to vote on the rights plan at the next annual meeting. But the date for the meeting isn’t set yet, and last year’s confab didn’t take place until June. That leaves an awful lot of time for SandRidge’s management to rebuff interested bidders. Icahn should keep pushing, and see this fight through to the end.

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