The proposal highlights the prolonged efforts by Fir Tree Partners — an activist shareholder which supports Midstates’ offer — to replace SandRidge’s leadership. Fir Tree, along with Icahn, had criticized SandRidge’s management and Chief Executive James Bennett for what they called years of poor decisions.
Fir Tree is among the biggest shareholders in both Midstates and SandRidge. Icahn is SandRidge’s largest shareholder.
While SandRidge shareholders will hold 60 percent of the combined company, according to the proposal, Midstates’ CEO David Sambrooks will be in charge — a move that may pacify Icahn and Fir Tree.
“The role of overlapping large holders in both entities suggests this is an effort to put SandRidge’s assets into Midstates’ hands, which implies SandRidge’s management and board would be unlikely to survive the merger,” Mizuho analyst Timothy Rezvan said.
A deal will likely create an oil-and-gas producer valued at nearly $1 billion.
Both Midstates and SandRidge have large holdings in the Mississippian Lime shale formation that is spread across Northern Oklahoma and Southern Kansas.
The formation has seen production dip as oil producers moved on to more prolific shale plays including the Permian and the Bakken.
Midstates, however, said the combined company would have little debt and free cash flow (FCF) of up to $480 million over the next five years.
Midstates’ shares, which shed 20 percent last year, rose 1.2 percent on Tuesday.
Midstates’ proposal says SandRidge shareholders will receive 1.068 shares of Midstates for each share held.