Just a week after taking a stake in Chesapeake Energy Corp., activist shareholder Carl Icahn has helped orchestrate a shake-up at the nation's No. 2 natural gas producer.
Chesapeake said Monday it plans to replace four of its existing board members in the next few weeks. The decision follows extensive talks with Icahn and Chesapeake's biggest shareholder, Southeastern Asset Management.
Icahn recently acquired a 7.6 percent stake in Chesapeake. He said the board needed some fresh blood in order to manage a huge debt load and properly oversee company management, including Chief Executive Aubrey McClendon.
The agreement calls for Icahn or a person he chooses to take one seat on the board. Icahn will make that decision before the new board is put into place. Southeastern Asset Management, which holds a 13.6 percent stake, will select three board members. A fifth board member is retiring.
Icahn's Chesapeake stock purchase was disclosed in a regulatory filing last month. He spent about $785 million for 50.1 million shares. Icahn is known for investing in companies and aggressively calling for change.
Chesapeake's board has been under fire for allowing McClendon to borrow money from a company that it was doing business with, run a hedge fund that bet on oil and gas prices and for allowing him the perk of buying personal stakes in company wells.
Chesapeake, along with other natural gas companies, has been hit hard by falling natural gas prices. The Oklahoma City company's shares have lost almost half their value in the past year. They rose 3 percent to $16.04 in morning trading on Monday.
"We are pleased that Chesapeake is being responsive to issues raised by us and many of the company's other shareholders. These steps to reconstitute the Board will enhance oversight and provide greater accountability," Southeastern Asset Chairman and CEO O. Mason Hawkins said in a statement.
Chesapeake is seeking a new board chairman after agreeing last month to strip McClendon of that title. The company has agreed that the selection must be approved by Icahn and Southeastern Asset Management. McClendon will remain as CEO and a board member. The selection will be made by June 22.
"I am fully supportive of these measures and remain focused on executing Chesapeake's strategy," McClendon said in a statement.
Chesapeake's board will continue to have nine members.
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