A major deadline looms for CVR Energy Inc. as billionaire investor Carl Icahn’s tender offer to acquire all outstanding shares of CVR’s common stock for $30 per share in cash plus a contingent cash payment right (CCP) expires at 11:59 p.m. New York City time May 4. The CVR board does not recommend that shareholders tender, as it believes that the company’s potential long-term value exceeds the tender offer price. However, the board said it agreed to drop its “poison pill” so that shareholders would be able to still sell their shares in the tender should they initially not opt to sell.
On May 3, the CVR Energy board sent a letter to stockholders detailing for them what would happen if Icahn is successful. If at least 31,661,040 shares (which
represents approximately 36 percent of the outstanding shares) are tendered in time, Icahn will have won control, as he already owns 15 percent of the shares. Thereafter, Icahn is required to close the tender offer and accept all tendered shares for payment. He is then required to immediately provide all remaining stockholders not wishing to remain minority stockholders in a controlled company with an additional 10-business day period, during which they may tender any remaining outstanding shares for the same $30 in cash plus a CCP. If after these periods Icahn achieves 90 percent or more of the shares, he must cause a merger to take place in which all remaining outstanding shares will be converted into the right to receive the same consideration as in the tender offer ($30 per share in cash plus a CCP), unless such holder chooses to exercise statutory appraisal rights. If Icahn does not hold 90 percent or more of the outstanding shares at the conclusion of the subsequent offering period, those shares that have not been tendered will remain outstanding.
If Icahn does not receive the required level of stockholder support on May 4, he has agreed to terminate his tender offer and the pending proxy contest for control of the CVR board.
It is Icahn’s plan to sell CVR, with shareholders receiving additional money from that sale under the CCP. In the meantime, CVR says it has contacted possible acquirers to determine their level of interest in a potential transaction. If Icahn’s tender offer is completed, the board said it will supply him with information related to this process to assist him in the marketing process that he is required to undertake for 60 days beginning promptly after the completion of the tender offer.
In the meantime, the CVR nitrogen business – CVR Partners LP – released first-quarter results May 1 showing that net earnings nearly doubled, to $30.2 million ($.41 per basic and diluted unit) on net sales of $78.3 million, compared to the year-ago $16.7 million on sales of $57.4 million. Adjusted EBITDA was $38 million, up from the year-ago $25.9 million.
CVR said first-quarter UAN and ammonia prices were up at 51 percent and 9 percent, respectively. UAN was $313/st FOB, up from $207/st, while ammonia was $613/st, up from $564/st. UAN sales volumes were off at 158,300 st from 179,300 st, while ammonia was up slightly, to 29,900 st from 27,300 st. CVR produced 89,300 st of ammonia, of which 25,000 st was available for sale, while the rest was upgraded to 154,600 st of UAN. This compares to the year-ago ammonia production of 105,300 st, with 35,200 st available for sale and the remainder going into 170,600 st of UAN.
“We are very pleased with our financial performance during the first quarter of 2012,” said Byron Kelley, CVR Partners president and CEO. “Lower production volumes due to unscheduled down time for plant maintenance in March were more than offset by higher sales prices for our products in the first quarter of this year as compared to the first quarter of 2011. In addition, given the strong pricing environment we have seen during