CVR Energy (NYSE:CVI) is the next takeover target for activist investor, Carl Icahn and the company is desperately trying to get shareholders to vote against the proposed takeover. Icahn proposed $2.6 billion to take over the oil refiner however the board of directors is calling it “inadequate” and urging it to be overturned.
Tensions between the board and Icahn have been escalating in the last few weeks. Carl Icahn currently owns 14.5% of shares outstanding which already puts him in a strong position of influence. Back a few weeks ago, the company announced that they wanted to sell part of its subsidiary, CVR Partners and in return, would give shareholders a special dividend. Icahn was not impressed and was pushing for the entire sale of the business. He argued that there were quite a number of interested buyers that would be willing. It even got to the point that Icahn himself submitted a bid of $30 a share for the company. The offer proposed included a contingent value that gave holders of CVR Energy an additional payment is CVR were to sign a separate deal. Icahn would have paid the difference between the higher bid and his bid to investors.
Qualivian Investment Partners Up 30% YTD; Long ORLY Thesis
Qualivian Investment Partners commentary for the second quarter ended July 30, 2020. Q2 2020 hedge fund letters, conferences and more “Short-term investors will accept a 20% gain because they didn’t spend the time to develop the conviction and foresight to see the next 500%.” - Ian Cassell Executive Summary Readers of investment letters fall into Read More
Management finally responded this morning saying that the offer of $30 a share is only a 3.9% increase from its September high of $28.88. Additionally, management said that the deal came with too many conditions that made it easy for Icahn to back out of the deal and leave everyone out to dry. The Board of Directors also questioned Icahn’s “additional cash payment” saying that it would most likely not be worth very much to investors.
Other potential buyers of CVR Energy are Western Refining, HollyFrontier Corp, Tesoro Corp, Valero, Marathon Petroleum and ConocoPhillips. Those are the big heavy hitters of the refining business. However, it is unclear from sources whether or not these companies are in direct talks with CVR Energy or if this is mere speculation on Carl Icahn’s part.
If these companies are in direct talks and have expressed an interest in buying CVR Energy, then that may be a better route to go for CVR than Icahn’s offer. I do believe CVR would be a strong addition to any of the companies listed above. CVR has the largest oil refining facilities in Kansas and Oklahoma. In addition they also have a processing and transportation business as well as a majority stake in a nitrogen fertilizer company. Either way I think CVR can and will be acquired at some point this year.