Earlier criticism was leveled by New York City Comptroller John C. Liu and two leading shareholder advisory services, who recommended against re-electing board members Burns Hargis and Richard K. Davidson at next month's annual meeting. Chesapeake's largest shareholder, Southeastern Asset Management Inc., also expressed its displeasure with the board and company strategy earlier this month. Southeastern owns about 13.6 percent of Chesapeake's outstanding shares.
Chesapeake defended the candidacy of Oklahoma State University President Hargis and former Union Pacific Corp. executive Davidson this week, but Icahn maintains change is needed.
In his letter, Icahn said he thought Chesapeake had collected some of the best oil and gas assets in the world. But he said the “stock price suffers because of the enormous risk associated with an ever-changing business strategy, enormous capital funding gap, poor governance and unchecked risk taking.”
He closed the letter with a warning to directors.
“Therefore, if you continue to arbitrarily refuse the request we have made for shareholder representation, we, as activists, will immediately take whatever ‘actions' we feel are necessary to protect the value of this company,” Icahn wrote.
Icahn previously bought into Chesapeake in December 2010, when he disclosed a 5.8 percent stake. The company soon promised to sell assets and reduce debt, pushing its stock to more than $35 per share in February 2011. Icahn then sold enough stock in the next several weeks to push his stake below the 5 percent level that requires regulatory disclosure.
He reminded the board of his previous investment in Friday's letter.
“In part, we believe, due to our presence, the company sold non-core assets, closed their funding gap and announced that they were through spending money on land,” Icahn wrote. “Shareholders rewarded the company for this newfound responsibility, and the stock rallied.”
Chesapeake shares are down more than 14 percent since mid-April. The stock gained 23 cents to close at $15.81 on Friday. The stock continued to gain in after-market trading.