WASHINGTON (dpa-AFX) - Activist investor Carl Icahn in a regulatory filing Friday, said he has acquired a 7.6 percent stake in natural gas producer Chesapeake Energy Corp. (CHK). Icahn bought nearly 50.1 million shares of Chesapeake for about $785 million.
In a communique, Icahn flayed Chesapeake Board for its inept working ways and asked at least 4 of the current directors be immediately replaced. Icahn said two directors be designated by him and the other two by a major stakeholder like Southeastern Asset Management, which is Chesapeake's largest shareholder.
Chesapeake got involved in some bad publicity recently after co-founder Chairman and CEO Aubrey McClendon was found to have borrowed $1.2 billion using his 2.5 percent stake in company wells obtained under the controversial Founder Well Participation Program, or FWPP.
McClendon subsequently agreed to step down as chairman, while continuing as CEO. Chesapeake also said it will prematurely terminate the FWPP.
Icahn censured Chesapeake board's plan to select a new chairman without both shareholder approval and representation. He said that is akin to asking the fox that ravaged the hen house to choose another fox to assist in guarding the remaining hens.
Icahn indicated the current board as inefficient, citing huge funding gaps that he believes have sharply eroded stock prices over the last year. Icahn recently met McClendon and asked for a board representation, but that request was turned down.
Icahn also said measures like pared spending and asset sales planned by the company will to some extent mitigate the problems, but that does not in any way obviate the need for a board shake-up.
Chesapeake in response said it will review Icahn's demands, adding its urgent aim being the naming of an independent non-executive chairman. Consequent to the event, the company said its board will consult with shareholders and review the Icahn request for board representation.
Chesapeake Energy, which is the second largest natural gas producer in the U.S., recently posted a loss for the first quarter that narrowed from a year ago, on higher production and reduced derivative losses. The company continues to grapple with depressed gas prices that has put pressure on the industry as a whole.
CHK closed Friday at $15.81, up $0.23 or 1.48%, on a volume of 40.5 million shares on the NYSE. In after hours, the stock was up $0.28 or 1.77%. The stock has trended in a range $13.32 - $35.75, in the last one year.
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© 2012 AFX News
