Chesapeake Energy Corp.’s largest investor on Monday delivered a stinging letter criticizing the board of directors and management team, and urged an outright sale of the company.

Southeastern Asset Management, which owns 13.6% of the Oklahoma City-based producer, sent a letter to the board that was also filed with regulators, which urged management to “be open to any offers to acquire the whole company.”

Southeastern last week stepped in to become an active participant in the company following reports about co-founder Aubrey McClendon, which ended with his dismissal as chairman (see Shale Daily, May 3). In the past few weeks McClendon, who remains CEO, has been accused of financial improprieties related to taking personal loans with companies that also do business with Chesapeake, as well as running a hedge fund that for a period used the same address as the corporation.

The Department of Justice has been asked by Sen. Bill Nelson (D-FL) to investigate the company for possible price manipulation and fraud, and the Securities and Exchange Commission has launched an informal inquiry (see Shale Daily, May 4).

In the letter Southeastern expressed concerns about how management handled shareholder communications. And it questioned senior management business strategies, such as the “25/25 Plan,” which McClendon regularly touts as putting the company on a path to reduce debt by 25% and increase output by 25%.

Chesapeake’s board, said the letter, should take action in three areas: debt targets, management focus and strategic options.

“We do not think that managing to an arbitrary target like the ’25/25 Plan’ makes sense,” the letter stated. “Our second set of concerns relates to management’s focus, and the time spent on unproductive communications…”

“We acknowledge that today’s low market price is far below the company’s net asset value [NAV] per share and would not encourage any action that would generate a lowball bid versus this NAV,” the letter stated. “We recognize the dangers of opening such conversations, which can sometime put a company ‘in play’ at an inopportune time. We therefore 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. 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 recognizes the longer term value of the company.”

A spokesman for Chesapeake said, “We appreciated receiving the letter and look forward to further discussions with our largest shareholder in the days and weeks to come.”