Pack mentality

5 February 2018 By Lauren Silva Laughlin Follow @TheRealLSL

More companies have been adding these elements to poison pills. But it took activist Carl Icahn’s campaign against SandRidge to thrust them into the spotlight. The goal is to prevent shareholders from speaking to each other. That should prompt owners to join forces to stop them.

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SandRidge Energy adopted a shareholder-rights agreement late last year after two large shareholders opposed the company’s agreement to buy rival Bonanza Creek Energy. The agreement, also known as a poison pill, authorized the company to issue preferred shares to stockholders if anyone acquired more than 10 percent of the company, effectively diluting the acquirer. It included a clause that would trigger the pill if any shareholders deemed to be “acting in concert” owned more than 10 percent of the company’s shares.

Icahn Associates, a fund run by activist investor Carl Icahn, and Fir Tree Partners collectively owned more than 20 percent of the company’s shares.

According to a company filing on Nov. 26, shareholders could be deemed to be acting in concert by actions including “exchanging information, attending meetings, conducting discussions or making or soliciting invitations to act in concert or in parallel.”

SandRidge abandoned the Bonanza Creek bid in December. On Jan. 23, the company dropped the “acting in concert” clause from its poison pill and raised the shareholding required to trigger the pill to 15 percent.

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Icahn Associates, a fund run by activist investor Carl Icahn, and Fir Tree Partners collectively owned more than 20 percent of the company’s shares.

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