SandRidge to add 4 TPG-Axon board members; CEO could leave

03/14/2013 10:23 AM

03/14/2013 10:25 AM

SandRidge Energy Inc. will add four directors named by TPG-Axon Capital Management LP and agreed to give the activist shareholder control of the board if Tom Ward is still running the company in four months.

The board is slashing director pay by a third to $250,000 a year from $375,000, Oklahoma City-based SandRidge said in a statement Wednesday.

President and chief operating officer Matthew Grubb is resigning after seven years at the oil and natural gas producer, the company said.

TPG-Axon, which owns 7.33 percent of SandRidge shares, blamed the seven-member board and chairman and chief executive officer Ward for “strategic blunders, extraordinary spending and poor governance” that caused the stock to drop. SandRidge, which is among the bigger gas and oil producers in Kansas, has seen its stock value fall over the past five years.

The settlement with TPG-Axon, led by former Goldman Sachs Group Inc. banker Dinakar Singh, is another successful shareholder action in a series of campaigns that have shaken up the industry in the past year. Chesapeake Energy Corp. co-founder Aubrey McClendon submitted his resignation after Carl Icahn and Southeastern Asset Management Inc. pushed for changes on the company’s board. Murphy Oil Corp. and Hess Corp. have also been subject to shareholder criticism.

“We believe these actions open a new chapter for SandRidge,” board member Jeffrey Serota said in the statement.

TPG-Axon has questioned land transactions between SandRidge and companies associated with Ward or his family members, and it has pushed for a new CEO and board. After an initial review absolved Ward of wrongdoing, SandRidge said Wednesday that the board is completing an independent review of the related-party transactions questioned by TPG-Axon. Results of that audit are expected by June 15.

TPG-Axon nominees Stephen C. Beasley, Edward W. Moneypenny, Alan J. Weber and Dan A. Westbrook are being added to the board immediately. The agreement gives the board until June 30 to decide whether to fire Ward, who founded the company in 2006. If he isn’t terminated, three existing board members will exit and an additional director will be named by TPG-Axon, giving the activist shareholder the majority of nominees.

Ward’s employment agreement gives him as much as $97.4 million if he’s fired because of a change of control on the board. The four new members being added to the board now don’t qualify as a change in control, SandRidge spokesman Greg Dewey said in an e-mail.

TPG-Axon may be gambling that the investigation will turn up enough information to fire Ward for cause, avoiding the need to make a big payout, said Jason Wangler, an analyst with Wunderlich Securities Inc. in Houston.

“They’re certainly feeling comfortable that they can move him out without having to pay him that money,” Wangler said in an interview. Wangler has a hold rating on SandRidge and doesn’t own any of its stock.

Tom Ward wasn’t available to comment on the settlement, according to Dewey. Singh declined to comment.

The company elevated chief financial officer James Bennett to president, and said he will serve as interim CEO if Ward leaves. Serota would become interim chairman for six months after Ward’s departure.

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