Kimmeridge Withdraws Independent Nominees to SilverBow’s (SBOW) Board Following Company’s Definitive Agreement with Crescent Energy
Key Summary: In Sep 2023, Riposte Capital (5.5%) criticizes Board & Management for aggressive growth and discounted stock sale. In Nov 2023, discontent over dilutive acquisitions, calls for Board changes. On February 16, 2024, Kimmeridge Energy Management Company stated its intention to nominate Board candidates. On March 13, 2024, it proposed merging with SilverBow Resources. On April 16, 2024, Kimmeridge announced that they are withdrawing their previous offer to merge KTG with the company. On May 16, 2024, Crescent Energy Company and SilverBow Resources, Inc. announced that they have entered into a definitive agreement pursuant to which Crescent will acquire SilverBow in a transaction valued at $2.1 billion. Subsequently, Kimmeridge withdrew their nominees.Market Cap: $962 million | SilverBow Resources, Inc., an oil and gas company, engages in exploration, development, acquisition, and operation of oil and natural gas properties in the Eagle Ford shale and Austin Chalk located in South Texas.
On February 16, 2024, Kimmeridge Energy Management Company (12.9%) stated its intention to nominate three individuals–Douglas E. Brooks, Carrie M. Fox and Katherine L. Minyard for election to the Board and to present a proposal to remove current director Christopher O. Majeske from the Board, each in connection with the 2024 AGM.
On March 13, 2024, Kimmeridge proposed to merge its Kimmeridge Texas Gas ("KTG") assets with SilverBow Resources. KTG's equity value stands at $1.1 billion, expected to reach $1.4 billion upon the transaction's close. Kimmeridge plans to contribute KTG assets in exchange for 32.4 million shares of SilverBow at $34 per share and inject $500 million of fresh equity at the same price, obtaining 14.7 million shares. This would result in Kimmeridge and its affiliates owning a majority of CombineCo's outstanding shares, totaling 50.3 million. The proposal, accretive to SilverBow shareholders, offers a premium of 8.5% over the closing share price on March 11, 2024, and 21% over the 30-day volume-weighted average price. Kimmeridge is financially prepared to fund the $500 million equity investment and intends to utilize the funds to reduce SilverBow's existing long-term debt. Highly confident letters from Barclays, RBC Capital Markets, and other lenders support Kimmeridge's ability to secure the necessary debt financing for the Transaction. Source
On March 28, 2024, the company announced that Christoph O. Majeske has resigned from the Board.
On March 29, 2024, Kimmeridge filed proxy materials seeking support for its nominees and proposals.
On April 1, 2024, Kimmeridge issued an open letter to shareholders, expressing frustration over the company's lack of engagement following Kimmeridge's proposal to combine Kimmeridge Texas Gas (KTG) and SilverBow. Kimmeridge also filed preliminary proxy materials for the nomination of three independent directors to the Board.
On April 12, 2024, Kimmeridge filed proxy materials seeking support for its nominees.
On April 16, 2024, Kimmeridge announced that they are withdrawing their previous offer to merge KTG with the company. Instead, they will concentrate on electing their nominees at the 2024 AGM. Source
On April 29, 2024, Kimmeridge released a presentation highlighting SilverBow's underperformance, value-destructive acquisitions, and governance issues. It urges shareholders to vote for Kimmeridge's three nominees to SilverBow's board for long-term value creation.
On May 2, 2024, Kimmeridge criticized SilverBow's M&A strategy in a presentation, highlighting value destruction. It urges shareholders to vote for Kimmeridge's three nominees to SilverBow's board for long-term value creation.
On May 13, 2024, Kimmeridge challenged the company's claims about its intentions and actions. They clarified their goal is to address underperformance and governance issues, not just pursue a merger with Kimmeridge Texas Gas. They urged shareholders to vote for their nominees on the GOLD proxy card. Source
On May 16, 2024, Crescent Energy Company and SilverBow Resources, Inc. announced that they have entered into a definitive agreement pursuant to which Crescent will acquire SilverBow in a transaction valued at $2.1 billion. Source
On May 22, 2024, Kimmeridge withdrew their nomination of the Nominees for election to the Board at the 2024 AGM. Source
Past
On September 28, 2023, Riposte Capital (5.5%) stated that they maintain their belief that the Board and Management are making decisions detrimental to the company and its shareholders. They criticized the company's aggressive growth strategy, exemplified by a recent stock sale at a significant discount. They noted that while most similar companies focus on metrics like free cash flow per share and share buybacks, the company is issuing equity at a lower valuation compared to peers. Riposte Capital accused the Board and Management of prioritizing self-interest over shareholder value. They called for specific actions, including the removal of a criticized poison pill, a shift towards profitability, changes in management incentives, and an independent review of strategic options, potentially including a sale of the company. Source
On November 30, 2023, Riposte Capital (6.7%) sent a letter to the Board expressing dissatisfaction with the Board's performance and highlighting that they previously advised the Board to avoid dilutive acquisitions due to the company's scale and financial profile. However, the Board proceeded with a $700 million acquisition of Chesapeake's South Texas position, which they believe eroded shareholder value. They also criticized the issuance of fresh equity at a 12% discount to an already undervalued share price. The letter concluded with Riposte Capital asserting that a significant change in the Board's composition is needed at the 2024 AGM, suggesting the nomination and election of three new independent candidates to better serve the company's interests.