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SandRidge adopts poison pill

SandRidge's Oklahoma City headquarters. [THE OKLAHOMAN ARCHIVES]
SandRidge's Oklahoma City headquarters. [THE OKLAHOMAN ARCHIVES]

SandRidge Energy announced Wednesday evening its board of directors adopted a tax benefits preservation plan commonly referred to as a poison pill to shield it from a potential hostile takeover attempt.

Adoption of the plan, officials stated Wednesday, is intended to reduce the likelihood of such an ownership change at SandRidge by deterring any person or group from acquiring beneficial ownership of 4.9% or more of SandRidge's outstanding common stock.

The plan, referred to as a “Section 382 Rights” plan, protects the availability of net operating loss carryforwards the company holds that could be used to offset future federal taxable income.

As of Dec. 31, SandRidge held approximately $1.4 billion of usable carryforwards, officials said.

Officials said the company’s ability to use those would be substantially limited if it experienced an "ownership change" as set out by Section 382 of Internal Revenue Code.

In general, the code states a company would undergo an ownership change if its "5% shareholders" increased their ownership of the company's stock by more than 50 percentage points over a rolling three-year period.

Were that to occur, other stockholders would be entitled to acquire shares of common stock at a 50% discount.

Under the Section 382 Rights Plan, any person which currently owns 4.9% or more of SandRidge's common stock may continue to own its shares of common stock, but may not acquire any additional shares without triggering the plan.

The board, officials said, has the discretion to exempt any person or group from the provisions of the plan.

Officials said the plan adopted by SandRidge will expire on the day following a certification of voting results for its 2021 annual meeting or following a special meeting of shareholders between now and then.

If shareholders ratify the plan at some point, SandRidge said it would continue to remain in effect until July 1, 2023.

Officials said the plan, while intended to prevent an unwanted overture, is not designed to prevent any action that the board might determine to be in the best interest of SandRidge and its shareholders.

Its stock, traded on the New York Stock Exchange under the ticker symbol "SD," closed at $1.30 on Wednesday, up a penny a share.

Jack Money

Jack Money has worked for The Oklahoman for more than 20 years. During that time, he has worked for the paper’s city, state, metro and business news desks, including serving for a while as an assistant city editor. Money has won state and regional... Read more ›