Oil and gas producer SandRidge Energy Inc. (SD, Financial) announced it had rejected Midstates Petroleum (MPO, Financial)'s all-stock bid on Monday, saying it was highly dilutive.
Tulsa, Oklahoma-based Midstates suggested combining the two companies in a stock-for-stock merger at a 60-40 exchange ratio, meaning SandRidge’s shareholders would own 60% of the combined company.
The company extended the offer last month after activist investor Carl Icahn (Trades, Portfolio) thwarted Oklahoma City-based SandRidge’s plans to buy Bonanza Ceek Energy (BCEI, Financial).
Icahn disclosed a 13.5% stake in SandRidge last November, saying he was opposed to the $746 million deal. He was joined by Fir Tree Partners, who said the cost was too high.
Fir Tree was involved in this deal as well, this time backing Midstates.
Although SandRidge dismissed Midstates’ offer, it did say it had received interest from other companies as well. While it did not disclose which companies had submitted proposals, the board will begin reviewing these offers in order to maximize shareholder value. In a statement, President and CEO Bill Griffin commented on the offers.
“In light of ongoing feedback from shareholders and several expressions of interest we have recently received, we have decided to engage advisors to solicit third-party proposals and assist in evaluating all strategic options available to the company,” he said. “While we evaluate strategic alternatives, we will remain focused on efficiently running our business.”
The strategic alternatives that the company plans to explore include divestment and joint venture opportunities at its North Park Basin assets in Colorado.
Following the announcement, SandRidge’s shares fell 2.8% in after-hours trading on Monday, while Midstates’ rose 2.2%.
With a market cap of $502.19 million, SandRidge was trading around $14.43 on Tuesday morning, up 2.41%, with a price-earnings ratio of 8.5, a price-book ratio of 0.63 and a price-sales ratio of 1.30. Midstates was up 0.91% at $13.33 on Tuesday.
Year to date, SandRidge has fallen 31% while Midstates has lost 20%.
While Icahn is SandRidge’s largest guru shareholder, John Paulson (Trades, Portfolio), Jim Simons (Trades, Portfolio), Francis Chou (Trades, Portfolio), Howard Marks (Trades, Portfolio) and Murray Stahl (Trades, Portfolio) also have positions in the company.
Marks, Simons and Barrow, Hanley, Mewhinney & Strauss are also shareholders of Midstates Petroleum.
Disclosure: No positions.
