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Carl Icahn says SandRidge Energy 'makes a banana republic look good'

  • Carl Icahn blasted SandRidge Energy for adopting a strategy that the billionaire investor says is designed to quash dissent from shareholders.
  • A so-called poison pill contains a provision meant to dissuade shareholders from communicating with one another, Icahn claims.
  • "This makes a banana republic look good," he told CNBC.

Carl Icahn on Thursday blasted SandRidge Energy for adopting a strategy that the billionaire investor says is designed to quash dissent from shareholders opposed to the company's purchase of fellow driller Bonanza Creek.

"This makes a banana republic look good," he told CNBC's "Fast Money: Halftime Report."

In a letter to SandRidge on Thursday, Icahn called the nearly $750 million deal, announced Nov. 15, "dilutive, overpriced and value-destroying." He seconded the opinion of Fir Tree Partners as saying "the proposed acquisition of Bonanza makes no economic or strategic sense."

Icahn Associates, a closely followed activist investor, holds a 13.5 percent stake in SandRidge, making it the largest single shareholder. Icahn said he bought up shares of SandRidge earlier this month as the stock price fell nearly 20 percent on news of the Bonanza purchase.

On Monday, SandRidge's board of directors adopted a so-called shareholder rights plan that would block any individual or group from amassing a 10 percent stake in its common stock. It would also prevent big shareholders like Icahn from buying any more shares.

The strategy is what's called a poison pill, an action taken by a company to automatically block events like shareholder activism or a hostile takeover. Icahn called the move a "complete travesty" that "represents a new low in corporate governance."

He specifically took issue with a provision that he says allows the board to trigger the pill if it determines large investors like Icahn are "acting in concert" with other shareholders. Icahn said the provision is "patently" absurd and clearly aimed at scuppering challenges to the Bonanza Creek deal.

Icahn told CNBC that while he takes issue with the Bonanza buyout and the performance of SandRidge CEO James Bennett, that provision is what convinced him to go after the company.

"Normally, this would be a little small for me," he said. "I think the concept of this is so outrageous and reprehensible, that it's sort of got to be stopped."

"One of the great things about our country, as I've said for years, is democracy, and one of the great things about our corporations is that you can go and change the companies if they're badly run."

Icahn Associates is prepared to take legal action against SandRidge if it perceives that the board aims to prevent shareholders from communicating, he said. In the letter, he asked SandRidge to clarify the intent of what he called an "ambiguous" provision.

Oklahoma City-based SandRidge and Bonanza Creek, headquartered in Denver, have both recently emerged from bankruptcy, having been swept up in a wave of restructurings following a historic crash in oil prices. Both companies have substantial operations in Colorado.

In a statement to CNBC, SandRidge said, "The acquisition of Bonanza Creek is highly strategic for SandRidge" and "will create long-term value for shareholders."

Despite Icahn's broadside against SandRidge, the company's shares were up more than 3 percent to $18.70 on Thursday.