Billionaire investor Carl Icahn issued an open letter to CVR Energy Inc. shareholders March 14, addressing some negative press about himself, as well as promising to walk away from the deal on March 23 if less than 36 percent of the outstanding shares are tendered by that date. “…we will respect the views of shareholders and move on to pursue other opportunities,” he said.
Icahn said a piece by a news organization was “so fraught with inflammatory rhetoric and reasons not to tender your stock that I would not be surprised if it was written by a PR firm paid for by CVR.” He said that a charge that he “burned” other shareholders to achieve a 35 percent return in 2011 was outrageous and ill-informed. He said returns achieved in 2011 were for all shareholders, not just his firm.
Icahn said his firm almost invariably targets companies where managements have repeatedly failed to deliver. “It is often only outside activists that can force them to change direction for the benefit of you, the shareholders,” he said.
He cited an article in the Journal of Applied Corporate Finance entitled "Is Carl Icahn Good for Long-Term Investors?" which he said concluded, among other things, that a significant number of his targets ended up being acquired or taken private within 18 months of his initial investment. He said the shareholders of those companies earned abnormal returns of almost 25 percent from the time of Icahn’s initial investment through the sale of the company. "I believe that as a result of our involvement, not only did all shareholders benefit, but that these companies became more productive and more competitive.”
“From our perspective as long-term and highly successful investors in the energy sector, we believe that the only way to release value at CVR is for the company to be sold or broken up at this time,” said Icahn. “With our tender offer, we are offering shareholders a win-win. If our offer is successful and our board nominees are elected, we believe that a sale of the company in an open auction process is possible, thus giving shareholders an opportunity for greater profit as a result of owning the contingent value right embedded in our offer. But even if we are unable to sell the company, you the shareholders will still have received $30 per share for a stock that closed at $26.78 on March 13 and has never closed above our offer.”
CVR Energy’s board of directors quickly responded, issuing their own letter. “Mr. Icahn’s actions and statements continue to surprise us. By his own admission today, CVR Energy is an unlikely target for Mr. Icahn. Mr. Icahn states that he targets ‘companies where managements have repeatedly failed to deliver,’ yet CVR Energy has delivered total returns to stockholders over the past three years of 588 percent, far exceeding both the S&P 500 and the average total return of our peer group. The same leadership team is still in place, and CVR Energy’s board and management continue to aggressively position the company for growth and are confident in the company’s prospects.”
CVR said several major news outlets have also looked closely at Icahn’s behavior, including The New York Times, The Wall Street Journal, and Institutional Investor. “We encourage stockholders to read these and other press articles and form their own conclusions about Mr. Icahn, his track record and his intentions with respect to CVR Energy. We believe that Mr. Icahn’s record with other companies where he has obtained a controlling influence serves as an important cautionary tale. Mr. Icahn’s volatile and disruptive tactics are a distraction from the fundamental strength of our business and the performance of our assets. We strongly urge stockholders to reject