Hedge fund seeks to oust SandRidge board

12/28/2012 7:03 AM

12/28/2012 7:04 AM

A New York hedge fund filed papers with federal securities regulators Wednesday seeking to oust the board at SandRidge Energy, the latest salvo in its continuing campaign against the struggling Oklahoma City oil and gas company.

The hedge fund, TPG-Axon Capital Management, which owns nearly 7 percent of SandRidge’s shares, submitted consent solicitation documents with the Securities and Exchange Commission, offering up its own slate of directors to replace the current board.

SandRidge has come under attack by TPG-Axon and another large hedge fund, Mount Kellett Capital Management, which have attacked the company over what it views as an onerous debt load, reckless spending and incoherent business strategy.

TPG-Axon’s securities filing came two days after it sent a blistering letter to SandRidge’s board, demanding that it investigate whether Tom Ward, SandRidge’s chief executive, and his son engaged in self-dealing and directly competing with the company.

“It is our understanding that Mr. Ward and his son, Trent Ward, actively compete with the company, and in addition, have also engaged in repeated transactions in which they ‘front-run’ the company,” Dinakar Singh, chief executive of TPG-Axon, wrote. “It is astonishing that the CEO of a company would engage in behavior that directly competes with his shareholders’ interests for his own personal benefit.”

The letter accuses the Wards of acquiring mineral rights and then leasing those rights to SandRidge for a profit. In securities filings earlier this year, SandRidge said it had purchased interests in mineral rights from an entity owned by Ward family trusts.

SandRidge’s shares are down more than 75 percent since its 2007 initial public offering and more than 90 percent since its peak in June 2008. The stock was flat in Wednesday’s session.

TPG-Axon’s SEC filing was made in conjunction with a lawsuit filed Monday in the Delaware Court of Chancery. The lawsuit challenges a move by SandRidge to shorten the time that shareholders have to vote on changing the company’s bylaws and replacing the board of directors with TPG-Axon’s slate.

The solicitation by TPG-Axon will be sent in early January to SandRidge shareholders, who would then have up to 60 days to consent to the fund’s proposal to elect a new board, which includes Singh.

Much of TPG-Axon’s criticism has been aimed at Tom Ward. Ward started SandRidge after leaving Chesapeake Energy, a much larger Oklahoma oil and gas concern that he co-founded. He is a part-owner of the Oklahoma City Thunder professional basketball franchise along with Aubrey McClendon, a co-founder of Chesapeake and its chief executive.

Ward’s total compensation in 2011 was $25 million, representing about half of the company’s earnings that year.

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