SandRidge Energy Inc.’s value will rise if shareholders vote to replace the company’s board in a proxy contest brought by TPG-Axon Capital Management LP, hedge fund manager Dinakar Singh said.
Singh, TPG-Axon’s chief executive officer, and a second shareholder, Mount Kellett Capital Management LP, also are demanding the ouster of SandRidge’s founder and CEO Tom Ward and a sale of the company.
Mount Kellett today sent a letter to the board asking for an investigation into whether Ward and his family improperly profited from their ties to the company. Singh’s TPG-Axon is soliciting shareholder votes to replace SandRidge’s directors. Voting began yesterday and continues for 60 days.
“Over the next few months, shareholders get to decide whether they want this board or a new board,” Singh said in an interview today on Bloomberg Television’s “Market Makers” with Erik Schatzker and Stephanie Ruhle. Replacing the board represents “a clear path” to improving shareholder value, Singh said.
TPG-Axon owned 6.7 percent of SandRidge as of December, and Mount Kellett owned 4.5 percent as of November, according to data compiled by Bloomberg.
SandRidge’s board should hire an outside law firm and accountants to investigate business transactions between Ward, his son, Trent Ward, and the company, Mount Kellett said in its letter. Singh outlined the transactions in his own Dec. 24 letter to the board, which Mount Kellett has reviewed “with intense concern,” the hedge fund’s Chief Operating Officer Jonathan Fiorello wrote today.
SandRidge has disclosed that it acquired working interests in leases from WCT Resources LLC, which is owned by trusts benefiting Ward’s children, according to filings with the U.S. Securities and Exchange Commission. Greg Dewey, a spokesman for SandRidge, declined in an e-mail to comment beyond those filings.
In his Dec. 24 letter, Singh said the company has not disclosed the full extent of Ward and his son’s involvement in the lease sales and how they profited from the transactions.
Leasing and reselling acreage in areas where SandRidge was also trying to acquire land or form joint ventures “put WCT in direct competition with the company and potentially siphoned value from SandRidge shareholders and into the pockets of the Ward family,” Fiorello wrote in his letter today.
Ward owns 5.1 percent of the company. Fairfax Financial Holding Ltd., whose CEO Prem Watsa has called Ward “one of the best operators in the business,” owns 6.7 percent.
Riverstone Holdings LLC and The Carlyle Group LP (CG:US) jointly own the largest stake, about 10.5 percent. The firms haven’t spoken publicly about the proxy contest.
SandRidge rose 3 percent to $6.99 at the close in New York. The shares have fallen 14 percent in the past year.
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