Chesapeake Energy Corp. should be open to any takeover offers as it deals with the fallout of questions about CEO Aubrey McClendon’s personal business dealings, the company’s largest shareholder said.
O. Mason Hawkins, chairman and CEO of Memphis-based Southeastern Asset Management Inc., an investment company, sent a letter to McClendon and the Chesapeake board that was received Monday detailing its concerns about the company.
“We urge the company to take action in three areas: debt targets, management focus and strategic options,” Hawkins wrote.
Southeastern filed paperwork with the U.S. Securities and Exchange Commission last Wednesday to change its status with Chesapeake to become more vocal in company decisions as opposed to solely being an investor.
Southeastern holds more than a 13-percent stake in Chesapeake. In the SEC filing, Southeastern stated it would take a more active role in corporate governance and management matters involving Chesapeake. It would have the ability to enter into discussions with third parties regarding Chesapeake’s corporate transactions that are significant.
“They own 90 million shares or 13.6 percent and have lost more than $750 million in the last five weeks,” said Fadel Gheit, an energy analyst with Oppenheimer in New York. “They will likely force the company to sell most, if not all, of its assets. They will get their money back and more.”
Chesapeake’s stock has dropped more than 10 percent since April 18, when Reuters reported McClendon has secured up to $1.1 billion in personal loans by using his stake in the company’s wells as collateral.
A subsequent report indicated McClendon and co-founder Tom Ward operated a hedge fund from inside Chesapeake from 2004 to 2008 that traded in oil and natural-gas futures.
Southeastern said Chesapeake’s current share price is far below its net-asset value, so it would not support a “lowball” bid for the company.
McClendon has agreed to cede his position as Chesapeake’s chairman and allow the board to end his well-participation program next summer, 18 months before it was due to expire.
McClendon sent an email Monday to Chesapeake’s 13,400 employees about the scrutiny facing the company over the past few weeks.
He assured employees, “The board and I have taken actions to put the recent distractions behind us so that we can move forward together with our plan to continue building value for the company’s shareholders and other stakeholders.
“Although we will be slowing some of our drilling and leasehold acquisition activities because of the current 10-year lows in natural-gas prices, we will still remain by far the most active driller in the U.S.,” McClendon wrote.