CVR Energy Inc. (CVI:US), the oil refiner that’s 82 percent owned by Carl Icahn, rose after the billionaire investor withdrew his $29-a-share offer to buy the rest of the company.
Icahn, the chairman of CVR’s board, yesterday withdrew his Aug. 6 offer to pay at least $29 and no more than $30 a share for the Sugar Land, Texas-based operator of refineries in Kansas and Oklahoma. Market conditions changed, including a widening margin between the cost of oil and the price at which refiners can sell fuel, and the deal is no longer “feasible,” Icahn wrote in a letter to the board.
An increase in so-called crack spreads, a measure of refining profitability, may have made Icahn’s offer appear low to investors (CVI:US) who held onto shares as he increased his stake, said Neil Earnest, practice leader for mergers and acquisitions at Dallas-based consulting company Muse, Stancil & Co. The shares have traded above $29 every day since Icahn’s Aug. 6 bid was announced.
“He put a fairly big bet down on short- and medium-term refining margins, and whether or not he’s going to be happy as an investor remains to be seen,” Earnest said in a phone interview today.
CVR increased (CVI:US) 1 cent to $29.56 at the close in New York. The shares have risen 58 percent this year.
“His offer was not going to cut it,” said Louis Meyer, a New York-based special situations analyst at Oscar Gruss & Son Inc. “Refiners are way up this year.”
Remaining shareholders may hold out for at least $35 a share, Meyer said.
Icahn gained control of CVR in May after saying the company would reap more value for shareholders if it put itself up for sale. He prevailed in a proxy fight with management by offering $30 a share and the right to an additional payment if he sold the company. More than 30 potential bidders were contacted over a 60-day sale process and no “credible” offers were received, according to a July 26 company statement.
The crack spread for West Texas Intermediate crude widened 6.8 percent to $32.886 a barrel yesterday in New York from $30.794 on Aug. 6.
CVR also owns the general partner of fertilizer maker CVR Partners LP (UAN:US), which last week filed plans to sell as much as $1.32 billion worth of units.
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