Activist investor Carl Icahn has taken a sizable stake in Chesapeake Energy Corp. and is calling for at least four of company's directors to be replaced.
Icahn spent about $785 million to buy 50.1 million shares, or 7.6 percent, of the second-largest U.S. natural gas producer.
The billionaire investor's stock buy was disclosed in a regulatory filing Friday. It comes as Chesapeake has been criticized for allowing CEO Aubrey McClendon to borrow money from a company that it was doing business, 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. Its shares have lost almost half their value in the past year.
McClendon gave up his post as chairman May 1 after reports of his financial dealings were made public. Investors have expressed concerns that the transactions could have influenced the company's business decisions. McClendon said he borrowed $846 million in principal.
Chesapeake is now looking for a non-executive chairman, and Icahn said shareholders need to have input on that decision.
Icahn is known for investing in companies and aggressively calling for change. He said he recently met with McClendon and asked him to consider direct shareholder representation on the board. Icahn said Chesapeake Energy refused to consider the suggestion.
"Having the current board select a new chairman without shareholder approval and without allowing for shareholder representation is akin to asking the fox, who has plundered the hen house, to choose another fox to assist it in standing guard over the remaining hens," he wrote in a letter to the company.
Chesapeake issued a statement late Friday saying it would review Icahn's proposal after the company names a new independent chairman, which it said was the board's immediate priority.
"We share Mr. Icahn's belief that Chesapeake shares are substantially undervalued by the market today," the company said. "The board and senior management are executing a plan that we believe will deliver a higher stock price and better recognize the underlying value of the company's assets."
Earlier this month McClendon said he would welcome Icahn as a shareholder. Icahn also briefly invested in Oklahoma City company in 2010.
Friday's move makes Icahn the third-largest shareholder in Chesapeake Energy after Southeastern Asset Management and Wellington Management. Icahn says he wants to name two directors to Chesapeake's board and that another big shareholder should name two other directors. Southeastern owns 87.4 million shares, or a 13.2 percent stake in the company, and it has said it approved of McClendon's decision to step down as chairman.
Icahn did not name the directors he thinks should be replaced, but said Louis Simpson, who is the chairman of SQ Advisors LLC in Naples, Fla., should remain on the board. Chesapeake has a total of nine directors including McClendon and Simpson.
Some investors had complained in the past about the company's compensation policies. Earlier this month, Chesapeake said it will cut McClendon's pay, reduce the pay of outside directors on its board by 20 percent and eliminate their use of company aircraft.
Chesapeake Energy shares rose 23 cents to close at $15.81 Friday and picked up 20 cents to $16.01 aftermarket.