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Icahn sinks his teeth into Chesapeake

SAN FRANCISCO (MarketWatch) -- Carl Icahn confirmed Friday that he's bought a 7.56% stake in badly wounded, horribly run Chesapeake Energy Corp. That gives him more than enough clout to shake Chesapeake's boardroom to the bone, and that's exactly what he intends to do.

The activist investor is demanding four of the nine seats on Chesapeake's (CHK) board: two for his crew and two for Southeastern Asset Management, the company's biggest shareholder. Read about Icahn's move on Chesapeake.

In refreshingly blunt language, Icahn accused Chesapeake's directors of failing at their jobs, letting Chief Executive Aubrey McClendon run the company as a personal fief. It wasn't until reports emerged last month of McClendon's special board-approved "founder's" stake in the company's oil and gas wells that investors really started howling.

The outcry finally forced McClendon to surrender the first half of his chairman and chief executive title, a position he'd swung for years with great effect over the bowed heads of his directors. But this arrangement didn't help shareholders, who have watched the value of their investment cut in half over the past year.

Icahn, cloaked in the noble mantle of "shareholder activist," is basically a Wall Street shark. His instincts quicken when he smells blood, and Chesapeake has been hemorrhaging for months.

Once on the scent, Icahn snapped up 50 million shares at a real bargain -- a point he drove home by calling Chesapeake's oil and natural-gas assets some of the best in the world.

At the same time, Icahn declared Chesapeake's business plan "doomed" unless management is subjected to strong oversight and accountability. Not surprisingly, Icahn's boardroom assault claims it will do just that.

Part of Icahn's plan insists that shareholders, not the board, appoint a successor to the chairmanship just vacated by McClendon. Hilariously, Icahn claims he discussed this with McClendon over dinner. (One can only imagine such an occasion, with McClendon feeling uncomfortably like the main course.) Of course, the chief executive rejected the demand, at which point Icahn bared his teeth.

The next act in this corporate drama is bound to be as entertaining as the first. But investors should remember that Icahn is in this to make money. News that Icahn's poked his nose into Chesapeake's boardroom is probably enough to rally the stock when trading resumes Tuesday, after the long Memorial Day weekend.

That doesn't mean Icahn's going to save Chesapeake from its own devices, but it's the first sign in months that the company might be on the path to redemption, whether it likes it or not.