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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

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.

CONTRIBUTING: Paul Monies, Business Writer

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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