SemGroup OKs 'poison pill' option after buyout bid
BY ROD WALTON World Staff Writer
Saturday, October 29, 2011
10/29/11 at 5:10 AM
Read the Tulsa World’s coverage of the SemGroup collapse and recovery.
SemGroup Corp. launched its counterattack Friday against Plains All-American Pipeline LP's unsolicited buyout bid by approving the "poison pill" option.
The tactic, formally known as the shareholder rights plan, was unanimously approved by the SemGroup board of directors, the Tulsa-based midstream energy company announced Friday. Plains All-American made its $1.2 billion bid public earlier this week but complained that SemGroup executives were not communicating with it. SemGroup responded by rejecting the offer and saying the bid, at $24 per share, undervalued the oil, gas and asphalt storage and transportation firm.
"The Rights Plan is intended to enable all SemGroup stockholders to realize the long-term value of their investment in the company," the SemGroup release reads. "It will not prevent a takeover, but should encourage anyone seeking to acquire the Company to negotiate with the Board of Directors prior to attempting a takeover."
The rights plan, which can be limited in duration, allows SemGroup to issue one right to purchase one half share of common stock for each share outstanding at close of business on Nov. 7. The rights can be exercised if one person or group acquires 10 percent or more of company stock in a transaction not approved by directors, according to the release.
Dollar Thrifty Automotive Group Inc., another Tulsa-based firm facing a hostile takeover earlier this year, adopted a shareholder rights plan in May. Hertz Global Holdings Inc. dropped its buyout bid this week.
Plains All-American, one of the nation's largest publicly held pipeline firms, originally sent an Oct. 6 letter to SemGroup officials asking them to consider the merger. A press release earlier this week expressed frustration at the Tulsa company's lack of response.
"We are also disappointed by your board's unwillingness to engage in constructive discussions about our proposal," the recent Plains letter states. "Accordingly, we are compelled to take our proposal directly to your stockholders by making the terms of our proposal public."
SemGroup responded by downgrading the Plains offer as "opportunistic" and "not compelling." If exercised, the rights plan would dilute SemGroup stock and make it harder for the hostile bidder to gain a controlling interest. The Tulsa firm's response, however, left the door open for future potential transactions under more favorable circumstances.
"The SemGroup Board takes its fiduciary duties very seriously and is willing to consider any transaction that reflects the full and fair value of SemGroup's current business and future prospects," the Monday statement reads.
Shares of SemGroup rose 23 cents to close at $28.32 Friday on the New York Stock Exchange. Traders have bumped SemGroup up nearly $9 per share in the past three weeks of trading.
SemGroup has struggled to generate profits since emerging from Chapter 11 bankruptcy protection in December 2009. The company had suffered $12.3 million in net losses in the first two quarters this year.
Founded in 2000, SemGroup LP grew into one of the nation's biggest privately held companies through 2007. By 2008, however, nearly $3 billion in margin losses on oil futures positions sapped the firm's cash flow and forced it into bankruptcy, according to reports.
SemGroup emerged from Chapter 11 as a public entity and changed its corporate structure from the previous limited partnership.
Original Print Headline: SemGroup OKs 'poison pill' after buyout bid
Rod Walton 918-581-8457