Under Canaan’s shareholder rights plan, preferred stock purchase rights will be distributed to shareholders of record as of the close of business on March 25. The shareholder rights plan actually was under consideration before the tender offer by Chesapeake. The rights plan is designed to assure that Canaan’s shareholders receive fair and equal treatment in the event of any proposed takeover of the company and to deter potential abusive tactics to gain control of the company without paying a fair price to shareholders. The plan won’t prevent a takeover, but should encourage anyone seeking to acquire the company to negotiate with the board. The rights will be exercisable only if a person or group acquires 15% or more of the company’s common stock.

Chesapeake said Monday it intended to commence a tender offer within a few days. Chesapeake said it would prefer to negotiate a mutually acceptable business combination, but that previous refusals by Canaan’s management to share Chesapeake’s previous offers with its shareholders have compelled Chesapeake to go directly to Canaan’s shareholders.

“We believe that any further attempts to discuss business combination possibilities with Canaan’s management will be pointless, unless Canaan’s shareholders can be made aware of Chesapeake’s proposal,” Chesapeake CEO Aubrey K. McClendon said earlier this week. “We are sending that message today with our proposed premium offer of $12 per share in cash.

“Our proposal provides Canaan shareholders with an immediate opportunity to realize significant value and much needed liquidity. We believe that our current proposal is generous to Canaan shareholders. We hope that Canaan’s management will not deny Canaan’s shareholders the opportunity to consider Chesapeake’s proposal as an alternative to management’s business plan, a plan that has to date only eroded shareholder value through poor operating and financial performance.”

Canaan reported record revenues of $28.4 million last year and production of 7.6 Bcf. Year-end proved reserves totaled 94.9 Bcfe. Due to sharply lower year-end gas prices, a $13.4 million net noncash full cost ceiling writedown of Canaan’s oil and gas properties was taken, resulting in a net loss of $8.9 million.

Chesapeake reported net income of $215,356, or $1.33 per share, last year compared to $453,660, or 3.38 per share in 2000. Its production for 2001 was 161.5 Bcfe, comprised of 144.2 Bcf (89%) of gas and 2.88 MMbbl (11%) of oil. Chesapeake ended the year with 1,780 Bcfe of reserves, an increase of 31% compared to 2000.

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