Activist investor Carl Icahn has amassed a 7.5 percent stake in Chesapeake Energy Corp. and called for the replacement of four board directors at the energy company.
After two weeks of rumors about his purchase of Chesapeake shares, Icahn said in regulatory filings Friday afternoon his affiliated partnerships spent more than $785 million to buy more than 50 million shares. Icahn companies began buying shares April 19, just one day after Reuters began publishing a series of revelations about personal loans taken out by Chesapeake's chairman and CEO Aubrey McClendon.
Icahn sent a letter to Chesapeake's board of directors calling for the immediate replacement of four board members. He suggested they be replaced by two directors picked by him and two by another large shareholder. Icahn pointed to other companies he's invested in that made changes to their boards.
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In a statement, Chesapeake said it will carefully review Icahn's letter.
“We share Mr. Icahn's belief that Chesapeake shares are substantially undervalued by the market today,” the statement said. “The board and senior management are executing a plan that we believe will deliver a higher stock price and better recognize the underlying value of the company's assets.”
The board said its immediate priority was finding a nonexecutive chairman to replace McClendon, who will remain as CEO.
“After an independent chairman is named, the board's Nominating Committee will consult with shareholders and carefully review Mr. Icahn's request for board representation,” Chesapeake said.
Oppenheimer analyst Fadel Gheit said bringing in new board members would be a “very positive” move in the eyes of investors and analysts who follow Chesapeake.
Phil Weiss, senior energy analyst at Argus Research, said it seems Icahn's relationship with Chesapeake has turned adversarial, but that could benefit shareholders.
“Anything that can spur real change is a potential plus,” Weiss said.