SCHEDULE 13D/A: Activist Investor Ned Sherwood Escalates Proxy Battle at Barnwell Industries, Citing Poor Performance and Governance Failures

Activist investor Ned L. Sherwood and his affiliates have intensified their proxy contest with Barnwell Industries Inc., proposing a new slate of directors and criticizing current management's financial performance and corporate governance.

Summary

• Ned L. Sherwood and his affiliates beneficially own 3,006,033.138 shares of Barnwell Industries Inc. (BRN), representing approximately 29.90% of the company's outstanding common stock.
• The reporting persons have submitted a slate of five director nominees for election at Barnwell's 2025 annual meeting, following the company's refusal to accept proposed amendments to a terminated Cooperation & Support Agreement.
• Barnwell Industries reported a loss of $1,917,000, or $0.19 per share, for the quarter ending December 31, 2024.
• The activist group intends to file a proxy statement and accompanying proxy card to solicit votes for their director nominees if the company continues to refuse their nominations.
• The proposed director slate includes Doug Woodrum (finance/operations), Heather Isidoro (oil and gas expertise), Brian Henry (M&A expertise), Ben Pierson (investment/oil and gas knowledge), and Ned L. Sherwood (private equity/general business expertise).
• The group alleges that current management, particularly CEO Alex Kinzler, Ken Grossman, and Josh Horowitz, is responsible for poor financial performance, excessive compensation, and questionable investment decisions.
• They highlight a $1,334,000 total impairment on a $5,354,000 Texas oil and gas investment made in December 2022, representing 24.90% of the original investment, which they claim was made improperly by Alex Kinzler.
• The activist group accuses the current board of implementing poor corporate governance practices, including forming an improper Special Committee, adopting a poison pill, and changing bylaws to entrench management.
• They affirm no current intent to engage in a control transaction but are prepared to pursue litigation on behalf of the company if investigations into alleged fiduciary breaches warrant it.

Sentiment

Score: 2

Explanation: The sentiment is overwhelmingly negative towards the current management and their performance, with strong accusations of poor governance, value destruction, and excessive spending. The reporting person expresses strong confidence in their proposed slate's ability to turn the company around, but the overall tone regarding the company's current state is highly critical.

Positives

• The proposed slate of directors brings diverse and relevant expertise in finance, oil and gas, mergers and acquisitions, and investment, aiming to improve company performance.
• The activist group's stated intent to dramatically reduce overhead and shut down extraneous money-losing operations could improve profitability.
• The plan to exploit Barnwell's oil and gas assets and utilize its $41 million tax loss carryforwards for profitable add-on acquisitions presents a clear strategy for value creation.
• Ned L. Sherwood's personal track record of greater than 35% per annum return history in private equity suggests potential for value accretion if his slate is elected.

Negatives

• Barnwell Industries reported a significant loss of $1,917,000, or $0.19 per share, for the quarter ending December 31, 2024.
• The company's stock performance under current CEO Alex Kinzler has been historically poor, with a $1,000 investment in 1984 now worth only $457.
• A $5,354,000 investment in Texas oil and gas properties in December 2022 has incurred total impairments of $1,334,000 (24.90%) as of December 31, 2024, attributed to alleged improper decision-making by CEO Alex Kinzler.
• Allegations of excessive remuneration and perquisites received by the Kinzler family over decades, contributing to accumulated tax loss carryforwards.
• Significant non-productive legal and shareholder defense expenses, exceeding $4 million, allegedly funneled to a related law firm to fight against shareholder efforts.
• Accusations of unbelievably bad corporate governance, including the formation of an improper Special Committee, implementation of a poison pill, and changes to bylaws to entrench current management.
• Claims that important information about Special Committee expenditures has been withheld from the entire board and even the CEO.

Risks

• The ongoing proxy fight could result in significant additional legal and shareholder defense expenses for Barnwell Industries.
• Continued poor financial performance and value destruction if the current management remains entrenched.
• Potential for further impairments on existing oil and gas investments if operations are not rationalized or managed effectively.
• Risk of continued poor corporate governance practices if the proposed director slate is not elected.
• Uncertainty regarding the timing and outcome of the 2025 Annual Meeting of Shareholders.
• Potential for litigation if investigations into alleged breaches of fiduciary duties by current management are pursued.

Future Outlook

The reporting persons intend to make a filing with the SEC of a proxy statement and accompanying proxy card to solicit votes for the election of their director nominees at the next annual meeting of shareholders if Barnwell Industries continues to refuse their nominations. If their board slate is elected, they plan to promptly investigate alleged improper transactions and, if warranted, file appropriate litigation on behalf of the Company to recover damages. They aim to rationalize operations, reduce overhead, and exploit oil and gas assets and tax loss carryforwards to build shareholder value.

Management Comments

• "I am confident that all members of my slate will work diligently to build shareholder value not build their personal net wealth via excessive remuneration and perquisites."
• "I believe it is imperative that we dramatically reduce overhead and shut down extraneous money losing operations immediately."
• "I hope to work with Brian [Henry] and attempt to find add on acquisitions for BRN using our $41 million tax loss carryforward as a lure for profitable tax paying companies."
• "I will attempt to utilize my over 40 years of experience in private equity and investing to make BRN another successful investment in my portfolio."
• "In my opinion, his [Ken Grossman's] primary role at BRN is to protect and perpetuate Alex Kinzler and his remuneration and perquisites and keep the gravy train going without regard for shareholder value/appreciation for the rest of us."
• "In my opinion, Josh's [Horowitz's] support of Kinzler/Grossman's entrenchment are contrary to the basic tenets of even mediocre corporate governance."
• "Although I can't be absolutely certain, Alex Kinzler must be ranked among the longest tenured worst public company CEOs in terms of performance for shareholders."
• "It is clear that Alex Kinzler has no regard for shareholder value and will do almost anything including breaching his fiduciary duties to the stockholders to retain power."
• "Make no mistake, if my board slate is elected, we will promptly investigate these, and any other matters that come to light, and if warranted, will file appropriate litigation on behalf of the Company to recover any damages caused by faithless and feckless fiduciaries."
• "We need to act quickly to turn around the company and stem the losses that are directly attributable to Kinzler/Grossman/Horowitz's entrenchment efforts and poor investment decision making."

Industry Context

This announcement highlights a significant shareholder activism campaign within the oil and gas and investment sectors, targeting a company with long-standing management. The proposed slate's focus on leveraging oil and gas expertise and M&A for growth, particularly utilizing tax loss carryforwards, reflects common strategies in the energy industry for consolidation and efficiency. The emphasis on corporate governance and shareholder value aligns with broader trends of increased investor scrutiny on executive compensation and board independence, especially in underperforming companies.

Comparison to Industry Standards

• The document implicitly compares Barnwell's current performance unfavorably to industry standards by highlighting its significant financial losses and historical stock underperformance, contrasting it with the proposed directors' successful tenures at other companies.
• Heather Isidoro's experience at Pine Cliff Energy, a partner in BRN's largest Canadian oil field (Twining), suggests a direct comparison point for operational and business development expertise within the oil and gas sector.
• Brian Henry's 29-year tenure at Terex, where he helped grow the company from a ~$50 million market cap to a current $3 billion market cap through over 60 transactions, serves as a benchmark for successful M&A strategy and value creation that the activist group aims to replicate at Barnwell.
• The activist's criticism of Alex Kinzler's performance, citing a decline in stock value from $1,000 to $457 since 1984, positions Barnwell as a severe underperformer compared to general market and industry returns over a multi-decade period.
• The alleged 'unbelievably bad corporate governance' and 'excessive remuneration' are presented as stark deviations from accepted corporate governance best practices and compensation norms in publicly traded companies.

Management Changes

Corporate Governance

Legal Proceedings

• The Reporting Persons intend to file a proxy statement and accompanying proxy card with the SEC to solicit votes for the election of director nominees.
• If the proposed board slate is elected, they will promptly investigate alleged improper transactions and, if warranted, will file appropriate litigation on behalf of the Company to recover any damages caused by faithless and feckless fiduciaries.

Related Party Transactions

• Allegations of excessive remuneration and perquisites received by the Kinzler family over decades.
• Claims that over $4 million in non-productive legal and shareholder defense expenses have been funneled into the pockets of Ken Grossman's brother's law firm.

Stakeholder Impact

• **Shareholders**: Significant potential for value accretion if the proposed management changes are successful, contrasting with historical value destruction under current management. Risk of continued losses and legal expenses if the proxy fight persists without resolution.
• **Employees**: Potential for rationalization of operations and reduction of overhead, which could lead to job changes or reductions in certain areas.
• **Management/Board**: Current management and board members face significant pressure and potential removal if the activist slate is elected. They are accused of breaching fiduciary duties and engaging in entrenchment tactics.
• **Creditors**: Potential for improved financial health and recovery of damages through litigation if the new board is elected and successful in its investigations and turnaround efforts.

Next Steps

• The Reporting Persons intend to make a filing with the SEC of a proxy statement and accompanying proxy card to solicit votes for the election of director nominees at the next annual meeting of shareholders.
• Shareholders are encouraged to email dumpkinzler@gmail.com to express support for the activist group.
• Shareholders are encouraged to email info@bocl.ca to express outrage at current management's behavior and urge them to set the date for the 2025 Annual Meeting.
• If the proposed board slate is elected, they will promptly investigate alleged improper transactions and, if warranted, file appropriate litigation on behalf of the Company.

Key Dates

Recommendation

Keywords

Barnwell Industries, BRN, Ned L. Sherwood, Proxy Fight, Shareholder Activism, Corporate Governance, Director Nominations, Oil and Gas, Financial Performance, SEC Filing, Schedule 13D, Management Change, Impairment, Tax Loss Carryforwards