In a just-filed SEC document, Southeastern Asset Management writes that the company should be receptive to buyout offers “The last point may be taken out of context, but is important: we urge the board to be open to any offers to acquire the whole company...We [want] to make clear that we would not support a bid which might be a large premium to today’s stock price but is meaningfully below NAV per share,” the company writes in a Schedule 13D filing addressed to management.
“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 recognises the longer term value of the company.”
Southeastern owns a majority-status 13 per cent of outstanding Chesapeake shares.
The fund, run by longtime manager Mason Hawkins, also takes the company to task for its recent communications strategy. Multiple outlets have been digging into Chesapeake CEO Aubrey McClendon’s personal well stake transactions as a potential source of conflict of interest.
“Sell-side conferences, media interviews with no hope of a fair hearing, and meetings all over the U.S. with groups who may have only a casual interest but don’t mind hearing the “story”use valuable amounts of top management’s time with no apparent benefit and plenty of misinterpretation detriment…we would suggest the current system of shareholder communications is not working.”
Finally, the fund question’s the company’s debt management strategy:
“We would prefer that management simply focus on maximizing operational cash flow after capex, instead of going for a volume growth target and spending significantly above maintenance capex currently to grow production to targeted levels. On the debt “25,” while we are in favour of the company reducing debt, we don’t think that management needs to be managing to a specific target there either.”