Carl Icahn Thursday revealed a hostile bid for CVR Energy Inc. (CVI: Quote), offering $30 per share in cash for all outstanding shares of the refiner.
The activist investor also offered a Contingent Value Right that entitles CVR Energy shareholders to an extra payment in case CVR Energy is sold for more than $30 per share.
Icahn believes the company's stock price does not reflect its true potential, and said he plans to nominate 9 individuals to the CVR Energy's board in a bid to get a mandate for the company to be put up for sale.
In recent talks with CVR Energy's CEO Jack Lipinski, Icahn had said that shareholders would be better served if the company put itself for sale, rather than pursue the limited initiatives announced by it.
Icahn said a sale of the company should attract potential buyers such as ConocoPhilips, Western Refining Inc., Tesoro Corp., Valero, among others. He said he plans to have talks with potential buyers over the next several weeks.
According to him, CVR Energy is a small company with only two refineries. As a result, shareholders face an unfavorable risk reward ratio since they bear not only the risk of a decline in crack spreads, but also the risk of production interruptions.
CVR Energy CEO Jack Lipinski meanwhile had said he would discuss Icahn's suggestions with his board and advisers.
Icahn said that if the current board of CVR Energy puts the company up for sale before the initial expiration date of Icahn's tender offer (expected to be on or about March 23), then he reserves the right to withdraw the offer and proxy fight.
In case the company is not put up for sale, Icahn, who recently revealed a large stake in CVR Energy, said he will proceed with the tender offer and proxy fight.
The tender offer will be subject to there being validly tendered and not withdrawn at least 35.76 percent of the issued and outstanding shares of the CVR Energy. The tender offer will also be conditioned upon the election of the Icahn slate of directors, the elimination of the company's poison pill, and other conditions.
Closing of the tender offer will not be subject to any due diligence or financing conditions.
Icahn opines that the refiner is worth at least $37 a share, representing a premium of 34.1 percent over the closing price of $27.60 on February 15, 2012. At that price, the company's market capitalization would be $3.25 billion, implying an enterprise value of $2.79 billion for the refinery assets.
Icahn's offer comes months after hostile bids for cleaning products company Clorox Co., and Commercial Metals Co. ended in failure due to lack of shareholders support.
Texas-based CVR Energy's two facilities in Kansas and Oklahoma have a combined capacity of 180,000 barrels a day. In its third quarter, the company reported a profit of $109.3 million or $1.25 per share, up from $23.2 million or $0.27 per share last year. Net sales for the period grew to $1.35 billion from $1.03 billion. Its refining margins were higher by about $9 at $33.92 a barrel.
Recently, the company acquired Gary-Williams Energy Corp. and its Wynnewood, Oklahoma refinery for $525 million, plus working capital currently estimated at about $100 million.
CVI closed Thursday on the NYSE at $29.20, up $1.60 or 5.80%, on a volume of about 6.9 million shares. In after hours, the stock dropped $0.34 or 1.16%.
by RTT Staff Writer
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