Ichan adds to pressure on Chesapeake board
Chesapeake Energy has come under even more pressure after its newest shareholder – activist Carl Ichan – spoke out about “breakdowns” in the company’s corporate governance and vowed to force changes at the struggling natural gas producer
On 25 May, Ichan disclosed taking a 7.6% stake in the company, pledging to take whatever “actions deemed necessary” to enforce accountability at Chesapeake. Ichan is a noted shareholder activist who claims his tough approach has increased the aggregate value of more than a dozen firms, including Motorola, Biogen, Genzyme, and Hain Celestial, by $55 billion.
In a letter filed to the Securities Exchange Commission (SEC), Ichan claimed lax oversight has caused the destruction of billions of dollars of Chesapeake’s value through a “complicated and risky” business strategy.
His firm, Ichan & Co, previously sold a 10% stake in the company in 2011 due to what he said were doubts about the company’s strategy and lack of representation on the board. With the latest deal, he was able to repurchase those shares for about a third of the price he sold them for.
Further, Ichan complained he was personally rebuffed when he approached Chesapeake’s chief executive Aubrey McClendon in an attempt to air his concerns.
Irregularities over Chesapeake’s “founders’ well programme” that grants McClendon 2.5% of every well the company drills, and allegations he oversaw a hedge fund that traded in natural gas futures, prompted an SEC investigation and forced him to step down as chairman on 1 May.
The company responded to Ichan by saying it is inappropriate to make changes to the board until a new chairman is found. However, Ichan said it is important Chesapeake respond to a “fluid situation”, and has requested the company delay its 4 June shareholders meeting in Oklahoma City, where it will appoint and re-elect directors.
Thus far, Chesapeake has refused. Ichan added: “We believe that without a strong board to demand accountability there is a significant chance that the value destruction shareholders have seen in the past few weeks may become irreparable. We cannot stand idly by and allow this to happen.”