Icahn Prevails on Bid for CVR Energy (IEP, CVI, UAN, DAL)

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As recently as last week it appeared that Carl Icahn’s Icahn Enterprises L.P. (NASDAQ: IEP) may not receive enough shares to complete his takeover of CVR Energy Inc. (NYSE: CVI). Those doubts were put to rest today as Icahn announced that about 63% of CVR’s shareholders had accepted his tender at $30/share plus a contingent value payment if he is able to sell the assets for more. The deal is worth $2.6 billion before any contingent value is added.

Icahn will replace seven of the nine-member CVR board, eliminate CVR’s recently adopted poison pill, and actually get his hands on the shares. Icahn will also receive the general partner interest that CVR holds in CVR Partners L.P. (NYSE: UAN) as well as CVR’s majority ownership of CVR Partners’ common units. CVR owns two refineries with a combined capacity of 180,000 barrels/day. CVR Partners owns and operates the company’s nitrogen fertilizer plant.

CRV owns two refineries, one in Kansas and the other in Oklahoma, and whether or not the two plants will command the prices Icahn is counting on is arguable. Delta Air Lines Inc. (NYSE: DAL) just paid $150,000 for a 185,000 barrel/day refinery, but the purchase price did not include the value of the crude oil stocks. Icahn’s purchase does include crude stocks.

The two acquired companies own crude oil storage facilities totalling 3 million barrels and a lease on 3.3 million barrels of storage capacity at Cushing, Oklahoma. It’s not clear how much crude is in these tanks, but 3 million barrels at $100/barrel is worth $300 million and there could more in the tanks.

The company’s nitrogen fertilizer business is considerably smaller than the petroleum operation, but had planned to expand capacity by 50% in the next two years. That growth plan is likely to be someone else’s problem now.

Shares of CVR Energy are up about 1.4% at $30.46 in a 52-week range of $16.62-$30.51, and common units of CVR Partners are down about -3% at $26.95 in a 52-week range of $17.76-$31.00.

Shares of Icahn Enterprises are down about -2% at $43.46 in a 52-week range of $35.01-$49.89.

Paul Ausick

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