DEFC14A: Sherwood Group Seeks Board Overhaul at Barnwell Industries Amidst Ongoing Dispute

The Sherwood Group is soliciting proxies to elect its nominees to the Barnwell Industries board, citing disappointment with the company's performance and entrenchment efforts by the current board.

Summary

• The Sherwood Group, owning 29.90% of Barnwell Industries' common stock, is seeking to elect five nominees to the company's board at the 2025 annual meeting.
• The group expresses disappointment with Barnwell's financial performance and accuses the current board of entrenchment tactics and wasting company resources.
• The Sherwood Group has filed a proxy statement to nominate its own slate of directors for the 2025 annual meeting.
• The Sherwood Group is also pursuing a consent solicitation to remove the current board and elect a new slate of directors.
• The Sherwood Group believes that a new board is necessary to turn around Barnwell's financial performance and maximize shareholder value.
• The Sherwood Group has identified five nominees with expertise in oil and gas, finance, mergers & acquisitions, and investments.
• The Sherwood Group has been in conflict with the current board for several years, alleging breaches of prior cooperation agreements and the implementation of poison pills to thwart shareholder rights.
• The Sherwood Group has filed a lawsuit in Delaware seeking to enjoin Barnwell from holding the 2025 annual meeting until the consent solicitation is complete.
• The Sherwood Group estimates that its solicitation expenses will be approximately $200,000, excluding costs of any litigation.
• The Sherwood Group is asking shareholders to vote FOR the election of Brian Henry, Heather Isidoro, Benjamin Pierson, Ned Sherwood and Douglas Woodrum and to WITHHOLD on the Company Nominees.

Sentiment

Score: 3

Explanation: The document expresses significant dissatisfaction with the current state of Barnwell Industries, highlighting poor performance, alleged mismanagement, and entrenchment tactics. The Sherwood Group is actively seeking to replace the board, indicating a negative outlook on the company's current leadership and direction.

Positives

• The Sherwood Group has nominated experienced professionals with expertise in oil and gas, finance, mergers & acquisitions, and investments.
• The Sherwood Group aims to cut costs, consider strategic alternatives, and maximize shareholder value.
• The Sherwood Group's nominees, with the exception of Mr. Sherwood and Mr. Pierson, are independent of the Company and the Sherwood Group under NYSE Listing Rules.
• The Sherwood Group intends to bring in a fully independent board with proven leadership.
• The Sherwood Group intends to make strategic use of tax assets and implement an acquisition strategy to leverage BRNs tax loss carryforwards.
• The Sherwood Group intends to dramatically reduce overhead costs by closing Hawaiian offices and consolidating operations in Calgary.
• The Sherwood Group intends to significantly reduce legal expenses which have been used to entrench current leadership and streamlining administrative functions by eliminating duplicative staffing and systems.
• The Sherwood Group intends to bring back to BRN a sharpened focus on value creation.

Negatives

• Barnwell's share price has decreased by over 50% since the Sherwood Group's initial investment in 2012.
• Barnwell made a $5,354,000 investment in a Texas oil and gas partnership without proper due diligence, resulting in impairments of 24.9% of the original purchase price.
• Barnwell has underperformed its competitors on approximately 70% of factors compared to ten different competitors.
• Barnwell spent approximately $1.5 million in legal fees and stockholder costs in 2022 to fight the Sherwood Group.
• The current board is accused of entrenchment tactics and wasting company resources.
• The company has adopted a poison pill without shareholder consent.
• The company has amended its bylaws without shareholder consent, effectively removing the ability of stockholders of record who hold at least 25% of the outstanding capital stock of the Company to call a special meeting.

Risks

• The Delaware Court may rule against the Sherwood Group in the ongoing litigation, preventing them from soliciting proxies for their nominees.
• The consent solicitation may not be successful, leaving the current board in place.
• The company's financial performance may not improve even with a new board.
• The company may continue to face challenges in the oil and gas industry.
• The company may face further legal challenges and expenses.
• The company may not be able to realize the full value of its tax loss carryforwards.
• The company may not be able to successfully execute its acquisition strategy.
• The company may face difficulties in reducing overhead costs and streamlining operations.
• The company may face difficulties in attracting and retaining qualified personnel.
• The company may face difficulties in complying with regulatory requirements.

Future Outlook

The Sherwood Group aims to implement a business strategy designed to create value for stockholders and objectively consider all strategic alternatives available to the Company in order to maximize stockholder value.

Management Comments

• Ned L. Sherwood: 'Our sole objective is to put in place a Board...that can execute a strategy that we believe will lead to a turnaround in financial performance and the realization of Barnwell's potential.'
• Ned L. Sherwood: 'A majority slate selected by the Sherwood Group, whether through the Consent Solicitation or the Proxy Statement, is the only way to save the Company moving forward.'

Industry Context

The document highlights the importance of effective corporate governance and strategic decision-making in the oil and gas industry, particularly for smaller companies facing financial challenges. The proxy battle reflects a broader trend of shareholder activism aimed at improving company performance and maximizing value.

Comparison to Industry Standards

• The document mentions that Barnwell has underperformed its competitors on approximately 70% of factors compared to ten different competitors.
• The document does not provide specific names of comparable companies or projects, making it difficult to assess the results in the context of global benchmarks.
• Without more detailed information on the specific factors used in the comparison, it is challenging to determine the significance of the underperformance.

Corporate Governance

Legal Proceedings

• Barnwell and its Executive Committee filed an action in Delaware on March 26, 2025, seeking an expedited determination as to whether the Sherwood Group complied with Barnwell's advance notice bylaw.
• The Sherwood Group filed its Answer and Counterclaims and Third-Party Claims alleging that Barnwell, acting through its Executive Committee, has wrongfully rejected the Advance Notice and Amended Advance Notice as untimely and has asserted claims against the members of the Executive Committee (Directors Kinzler, Grossman, and Horowitz) alleging a breach of the duty of loyalty for improperly seeking to entrench themselves and inequitably wielding the Company's bylaws to deprive shareholders of a voice in the governance of their Company.
• The Sherwood Group is seeking the issuance of a temporary restraining order to enjoin Barnwell from (a) filing or distributing further proxy materials related to the 2025 annual meeting, or (b) convening the Barnwell 2025 annual meeting until such time as the consent solicitation is complete (which is currently anticipated to be on or around May 13, 2025) and until the Court actually makes a determination regarding the Advance Notice submitted by us.

Stakeholder Impact

• Shareholders: The outcome of the proxy battle will significantly impact shareholder value and the direction of the company.
• Employees: Potential changes in management and strategy could affect job security and working conditions.
• Customers: Changes in the company's business plan could impact the products and services offered.
• Suppliers: Changes in the company's operations could affect relationships with suppliers.
• Creditors: The company's financial performance and strategic direction could impact its ability to meet its obligations to creditors.

Next Steps

• Shareholders are urged to vote on the GREEN universal proxy card for the election of the Sherwood Group Nominees.
• The Delaware Court will rule on the Sherwood Group's Advance Notice on or shortly after the trial set for May 13, 2025.
• The 2025 Annual Meeting of Stockholders will be held on May 29, 2025.
• The Sherwood Group anticipates filing its final proxy statement on or around May 5, 2025.

Key Dates

Keywords

proxy solicitation, board of directors, shareholder value, Barnwell Industries, Sherwood Group, consent solicitation, corporate governance, annual meeting, nominees, entrenchment