Top Chesapeake holder to stay open to buyout bids

Top Chesapeake holder to stay open to buyout bids

Reuters

(Reuters) - Southeastern Asset Management, the largest shareholder in Chesapeake Energy Corp, urged the natural gas company to remain open to potential acquisition offers despite the large gap between its share price and net asset value (NAV).

In a letter to Chief Executive Aubrey McClendon, Southeastern acknowledged the "dangers of opening such conversations" as the company struggles with concerns about McClendon's business dealings, on top of the low natural gas prices that threaten the entire industry.

"However, we also don't want to use this large price-to-value gap as an excuse to refuse discussions with any potential acquirers who would be willing to pay a price today that recognizes the longer term value of the company," said the letter, filed with U.S. securities regulators on Monday and signed by Southeastern CEO Mason Hawkins.

Southeastern, holding a 13.6 percent stake in Chesapeake, revealed last week that it planned to take a more active role in the affairs of the company.

This followed a series of revelations about the company, including a Reuters report on McClendon pledging his interests in many Chesapeake wells as collateral for more than $1.1 billion of personal loans.

The Southeastern letter also urged the company to accelerate its sales of assets not core to its exploration and production business, and expressed concern about the amount of time Chesapeake's management had spent on "unproductive communications" at conferences and in media interviews.

Chesapeake spokesman Michael Kehs said on Monday in response to the letter: "We appreciated receiving the letter and look forward to further discussions with our largest shareholder in the days and weeks to come."

One analyst said on Monday: "The problem you are going to have with Chesapeake is that it has become a very complex company because of the financings they've had to do," said Neal Dingmann at Suntrust Robinson Humphrey, whose NAV for Chesapeake is $30 per share.

"Because of the complexity of the company, somebody is going to really have to want those assets."

Shares of Chesapeake responded by giving up a small early gain on Monday, trading down 0.4 percent to $17.32 in the afternoon.

(Reporting by Braden Reddall in San Francisco and Anna Driver in Houston; Editing by Gerald E. McCormick and Matthew Lewis)