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 old
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.
Before the sale, Icahn threatened a proxy fight with executives and directors, nominating himself and an associate to the Kerr-McGee board. Icahn withdrew his effort after Kerr-McGee agreed to buy back $4 billion in stock, spin off its chemicals division and sell $2 billion in natural gas production assets.
“I think ultimately Kerr-McGee made the decision to sell,” said Steve Agee, dean of the Meinders School of Business at Oklahoma City University. “When you look at the history of mergers and acquisitions in the oil and gas industry, there's rarely a time when a major company is taken over in a hostile manner. Normally, a company taken over acquiesces to that takeover. That's what happened to Kerr-McGee.”
Earlier this month, however, Icahn won a takeover fight with another company with Oklahoma ties. He bought a majority interest in Sugar Land, Texas-based CVR Energy Inc., which owns the oil refinery in Wynnewood. After the CVR directors rebuffed his takeover effort, Icahn offered to pay $30 per share to buy the stock directly from shareholders. He paid $2.6 billion for a 69 percent stake in the company.
Besides speculation of a new active investor, an existing shareholder group on Monday filed a shareowner alert. The California Public Employees' Retirement System (CALPERS) asked stockholders to vote for a shareholder proposal that the company has opposed.
CALPERS owns more than 1.8 million shares, or less than 1 percent of the company's 642 million shares outstanding. The fund encouraged shareholders to vote for a nonbinding proposal that would ask the directors to require only a simple majority vote to change the company's bylaws and certificate of incorporation.
CALPERS also said it is concerned with “a lack of alignment between shareowners and Chesapeake” because Chesapeake uses a staggered board where only one-third of the directors are up for re-election each year and because of “concerns with compensation and transparency given the recent developments” with the Founder Well Program.
The well program allows McClendon to buy a personal stake of up to 2.5 percent in every well Chesapeake drills.
Chesapeake and its directors have been under intense scrutiny since April 18 when Reuters reported that McClendon used his stake in the company wells as collateral for up to $1.1 billion in personal loans. Earlier this month, McClendon and the Chesapeake directors agreed to end the program in June 2013, more than 18 months early.