Chesapeake urged to consider buyout offers The largest investor in Chesapeake Energy, the US gas producer that has come under scrutiny over its chief executive's personal finances, has urged the company to consider any possible takeover approach. Southeastern Asset Management, which represents clients holding 13.6 per cent of Chesapeake, wrote to Aubrey McClendon, chief executive, and other directors, saying: "We urge the board to be open to any offers to acquire the whole company." The letter, disclosed in a filing with the US Securities and Exchange Commission, also called on the board to abandon its plans for oil and gas production growth, to modify its debt reduction objective and to keep a lower profile. Tennessee-based Southeastern stressed that it did not want the company to do anything to encourage a "lowball" bid and would not support a takeover attempt at a price significantly below the company's net asset value. "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," it said. Ross Glotzbach of Southeastern said during a call with investors in February that Chesapeake's true value was more than twice the share price at the time, then about $21. The shares closed at $17.13 on Monday, down 1.5 per cent. "While Chesapeake has been a disappointing investment over the past few years, we think that the next few will be much better," Mr Glotzbach said. Chesapeake came under pressure last month when it emerged that Mr McClendon had been borrowing heavily on the security of his stakes in wells operated by the company. Since those stories emerged, the company's board has launched a review of his financial arrangements, moved to strip him of the chairmanship and begun a search for a new independent chairman. It has also ended a remuneration programme that gave Mr McClendon the right to take a personal 2.5 per cent stake in every well drilled by the company. The SEC is also conducting an informal inquiry, although the company has said this is not an indication that any securities law has been broken. Chesapeake has also been hit by a fall in the price of natural gas to 10-year lows of about $2 per million British thermal units, although it had recovered to about $2.35 per mBTU on Monday. The company needs to raise up to $14bn this year from asset sales, joint ventures and other deals to fund its capital spending ambitions and reduce its debts as planned. Southeastern in its letter urged Chesapeake to drop its plan for 25 per cent growth in oil and gas output during 2011-12, saying it would rather the company maximised operational cash flow after capital spending, rather than production volumes. It also queried the need for the target of cutting debt by 25 per cent, saying a general plan for reductions without a specific target would be better. It urged Chesapeake to "accelerate monetising any assets that are not core to the E&P [exploration and production] business (such as midstream [pipeline] & oil services assets) ." The increased pressure from Southeastern comes as some analysts have begun to highlight the value of Chesapeake's oil and gas assets. Sanford Bernstein, which began covering Chesapeake with an "underperform" rating a year ago, last week switched to rate it "outperform," with a target price of $21, while warning that the shares were "not for the faint of heart." Analysts have speculated about the possibility of a takeover bid, although some have suggested that potential buyers might prefer to wait to see if the shares fell even further. The personal position of Mr McClendon could also be an issue in any takeover. He owns only about 0.3 per cent of the equity but also has stakes in Chesapeake's wells worth hundreds of millions of dollars and is personally tied to the company, which he founded in 1989. Chesapeake did not immediately respond to Southeastern's letter.