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McClendon: Activist investor would make money with Chesapeake

Chesapeake CEO Aubrey McClendon on Monday addressed rumors that activist investor Carl Icahn is planning to buy a significant stake in the company. He said Icahn would make money if he invested in Chesapeake today.
by Adam Wilmoth Published: May 15, 2012

Chesapeake Energy Corp. shareholders continued to grow more active on Monday with corporate filings and reports that activist investor Carl Icahn is seeking a stake in the company.

Chesapeake CEO Aubrey McClendon discussed the speculation about Icahn during a conference call with analysts Monday morning.

“We wouldn't be surprised if Carl became a large shareholder,” McClendon said. “He did in 2010, and within six months, the stock went up 50 percent. He made over $500 million and called me to thank me when it was all over. I have a good relationship with Carl. If he comes in, I'm pretty confident that he'll make a lot of money.”

Public filings are required when an investor controls at least 5 percent of a company's stock. No recent public filings have been made about Icahn and Chesapeake, but The Wall Street Journal said Sunday that such a filing is expected soon, according to “people familiar with the matter.”

Icahn has a history of buying large stakes in companies he thinks are undervalued. Often, he then pressures management and directors to make changes he thinks will drive up the stock price.

McClendon said Monday that Chesapeake is undervalued. He said that the company's oil and natural gas assets are worth $50 billion to $60 billion, not including assets the company is trying to sell.

The company's stock price gained 4.8 percent Monday to close at $15.52 per share, but it has tumbled nearly 57 percent since August, dragging down Chesapeake's valuation.

“Carl Icahn is just like any other investor in that he has one goal in mind. That's to maximize shareholder value,” said Jake Dollarhide, CEO of Tulsa-based Longbow Asset Management Co. “Picking up Chesapeake's battered image off the floor and moving it a couple rungs up the ladder back to where it was should be his goal.”

Icahn's effect on companies varies, but his influence often leads to higher stock prices.

When Icahn last dealt with Chesapeake, the result was positive for Icahn, Chesapeake shareholders and Oklahoma City.

In December 2010, Icahn reported a 5.8 percent stake in the Oklahoma City energy company. Chesapeake soon promised to sell assets and reduce its debt. The stock price peaked at $35.61 in February 2011. A few weeks later, Icahn sold at least enough shares to drop below a 5 percent stake.

In his dealing years earlier with a different Oklahoma City company, Icahn and shareholders made a hefty profit, but Oklahoma City lost one of its oldest companies and hundreds of local jobs.

In February 2005, Icahn announced his intention to buy up to $1 billion of shares in Kerr-McGee Corp. Seventeen months later, Kerr-McGee management agreed to sell the company to Houston-based Anadarko Petroleum Corp. for $18 billion.

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by Adam Wilmoth
Energy Editor
Adam Wilmoth returned to The Oklahoman as energy editor in 2012 after working for four years in public relations. He previously spent seven years as a business reporter at The Oklahoman, including five years covering the state's energy sector....
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