DEFC14A: Barnwell Industries Board Urges Stockholders to Revoke Consent in Sherwood Group Solicitation

Barnwell Industries' board of directors is urging stockholders to reject the Sherwood Group's consent solicitation to replace the current board and repeal certain bylaw changes, advocating for stockholders to sign and return the WHITE Consent Revocation Card.

Summary

• Barnwell Industries' board is opposing a consent solicitation by the Sherwood Group, which seeks to replace the current board with its own nominees and repeal certain bylaw amendments.
• The board believes the Sherwood Group's actions are an attempt to seize control of the company without offering a control premium to stockholders.
• The board highlights Sherwood's past breaches of cooperation agreements, attempts to influence board members, and lack of a detailed plan for the company.
• The board recommends stockholders reject the Sherwood Group's proposals and revoke any previously submitted consents by signing and returning the WHITE Consent Revocation Card.
• The record date for determining stockholders eligible to give written consent is March 14, 2025, and properly completed consents must be received by May 13, 2025.
• As of the Record Date, there were 10,053,534 shares of Common Stock outstanding and entitled to vote.
• The company has commenced litigation to invalidate Sherwood's director nominees for the 2025 Annual Meeting.
• The company estimates that the total expenditures relating to the Company's consent revocation solicitation will be approximately $250,000, of which approximately $150,000 has been incurred as of the date hereof.

Sentiment

Score: 4

Explanation: The document is largely negative due to the conflict with the Sherwood Group and the need for a consent revocation. While the board presents a positive outlook for the company's future, the overall tone is defensive and concerned about the potential disruption caused by the activist investor.

Positives

• The board is actively opposing the Sherwood Group's consent solicitation to protect the interests of all stockholders.
• The board has a clear plan to enhance value for stockholders, including winding down its Hawaiian presence and reinvesting in oil and gas operations.
• Barnwell recently completed the sale of its wholly owned subsidiary, Water Resources International, Inc., for $1,050,000.
• The company has virtually no debt and is seeking funding to drill new wells in the Twining field in Alberta.
• The board has sought to constructively engage with Sherwood to avoid a costly proxy contest.
• The company is providing stockholders with clear instructions on how to revoke their consent and support the board's recommendation.

Negatives

• The Sherwood Group is attempting to gain control of the company without paying a control premium.
• The Sherwood Group has repeatedly violated agreements with the company.
• Sherwood himself lacks expertise or interest in the oil and gas industry, which is a primary business of Barnwell.
• Representatives of the Sherwood Group on the Board have repeatedly leaked confidential boardroom discussions to the Sherwood Group.
• Sherwood made a significant investment in a competing Canadian oil and gas venture founded and controlled by one of Sherwoods former director designees.

Risks

• If the Sherwood Group obtains control of the board, change of control provisions in certain of the company's material contracts and agreements may be triggered, potentially accelerating the vesting of unvested awards.
• The ongoing litigation with the Sherwood Group could be costly and time-consuming.
• The Sherwood Group's actions could have a destabilizing effect on the company.
• Failure to obtain sufficient consent revocations could result in the Sherwood Group gaining control of the board.

Future Outlook

Barnwell continues to take decisive action toward enhancing its financial and operational strength and is winding down its Hawaiian presence, transitioning back-office functions to Calgary, Alberta, and seeking funding to drill new wells in the Twining field in Alberta when there is more certainty around U.S.-Canadian relations.

Management Comments

• Sherwood has stated on multiple occasions that he doesn't understand or like oil & gas or real estate.
• Summarizing my ultimate vision for BRN, I see the Company as a cash rich entity with a $40+ million tax loss carry-forward that will, via an acquisition, unlock/create meaningful shareholder value.

Industry Context

This announcement reflects a common scenario in corporate governance where activist investors seek to influence or take control of a company, often leading to proxy contests or consent solicitations. The board's response is typical in defending its position and highlighting the potential risks of the activist's proposals.

Comparison to Industry Standards

• The tactics employed by the Sherwood Group, such as seeking board representation and proposing bylaw changes, are common strategies used by activist investors.
• The board's defense, including highlighting the activist's lack of industry expertise and potential conflicts of interest, is a standard approach in such situations.
• The use of a shareholder rights plan (poison pill) is a common defensive mechanism to deter creeping control.

Legal Proceedings

• The Company commenced a lawsuit against the Sherwood Group in the Delaware Chancery Court, seeking, among other remedies, declaratory judgment that the Defective Sherwood Nomination Notice was invalid and injunctive relief to enjoin the Sherwood Group from presenting its slate of nominees at the 2025 Annual Meeting due to the failure of the Sherwood Group to comply with the advance notice provisions of the Company's Bylaws.

Stakeholder Impact

• The outcome of the consent solicitation will directly impact shareholders, as it will determine the composition of the board of directors and the company's strategic direction.
• Employees could be affected by potential changes in management and operations if the Sherwood Group gains control.
• The company's relationships with suppliers and customers could be impacted by changes in strategy and leadership.

Next Steps

• Stockholders are urged to sign, date, and mail the enclosed WHITE Consent Revocation Card.
• The company will notify stockholders of the results of the consent solicitation by filing the results with the SEC.
• The company will continue with its litigation against the Sherwood Group.

Key Dates

Keywords

consent solicitation, board of directors, Sherwood Group, proxy contest, consent revocation, corporate governance, Barnwell Industries, stockholders