[Editor's note: This story was updated at 8:35 a.m. CST Nov. 28.]
SandRidge Energy Inc. (NYSE: SD) said Nov. 27 its board approved a plan to limit stake ownership in the company, days after activist investor Carl Icahn revealed a 13.5% stake, saying he would vote against the oil producer's bid for rival Bonanza Creek Energy Inc. (NYSE: BCEI).
Icahn, who disclosed the stake on Nov. 22, called the proposed deal "nonsensical" and joined other major SandRidge shareholder Fir Tree Partners in opposing a move that they said would drain all of the company's cash.
Fir Tree owns about 8% of SandRidge and has said the company was paying an "unjustified premium" for Bonanza Creek.
SandRidge said it adopted a poison pill, or shareholder rights plan, which is designed to stop investors from buying more than a 10 percent stake in the company and deter existing shareholders from bulking up their holdings.
SandRidge's shares were down 1.8% in midday trading. Bonanza Creek shares were up 0.3% at $28.47. They have not touched $36—the offer price—since SandRidge announced its bid on Nov 15.
SandRidge, which emerged from bankruptcy late last year following a recovery in oil prices, wants to expand in the Denver-Julesburg Basin of Colorado with its purchase of Bonanza.
Bonanza also emerged from bankruptcy earlier this year.
"The problem is [SandRidge] is buying Bonanza Creek but not accelerating their production," said Coker and Palmer analyst David Beard, noting that the deal would add debt to SandRidge's balance sheet.
SandRidge had cash, cash equivalents and restricted cash of $135.5 million as of the nine months ended Sept. 30 and long-term debt of $37.6 million.
Oklahoma-based SandRidge drills in the U.S. Midcontinent and Niobrara Shale, which spans northeastern Colorado and parts of Wyoming, Nebraska and Kansas. Bonanza Creek, based in Denver, is also focused on parts of Niobrara in Colorado, as well as Arkansas.
"SandRidge's assets are pretty far away from those of Bonanza Creek so there are no near-term synergies here," Beard said, adding that shareholders would like SandRidge to perhaps buy assets closer to its core operations.
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