John Paulson, the billionaire hedge- fund manager seeking to reverse record losses in 2011, said he likes CVR Energy Inc. (CVI) because the company may be successfully resold by Carl Icahn, who controls the majority of shares.
Billionaire Icahn’s tender offer for the oil refiner received the required shareholder support on May 7. Icahn won the right to buy CVR Energy after a majority of stakeholders agreed to sell their stock to him in an offer that values the company at $2.6 billion.
About 48 million shares were tendered in response to Icahn’s $30-a-share offer, giving him about 69 percent of the stock, according to a statement last week. Holders of the remaining stock have until May 19 to take the same offer, which includes the right to as much as $7 more a share if Icahn can resell the Sugar Land, Texas-based company.
“CVR Energy is a gift from Carl Icahn,” Paulson said yesterday at the Ira Sohn investment conference in New York. “Carl is generally particularly friendly to shareholders.”
Paulson & Co. didn’t hold any shares of CVR Energy as of March 31, according to data compiled by Bloomberg. Paulson said the company may be sold for about $36 a share. The stock closed yesterday at $30.35 in New York trading.
Paulson, 56, became a billionaire in 2007 by betting against the subprime mortgage market. Paulson & Co., his New York-based firm, manages about $24 billion.
Icahn has criticized CVR’s management and urged a sale of the company, which owns refineries in the U.S. Midwest and holds a majority stake in fertilizer maker CVR Partners LP. (UAN) CVR’s board had opposed the sale and said Icahn’s offer didn’t properly value the company over the long term.
Seven members of the CVR board will be replaced with Icahn nominees as soon as all the tendered shares are purchased, according to the May 7 statement. Icahn plans to resell CVR about 60 days after buying it.
Paulson also recommended shares of AngloGold Ashanti Ltd. (ANG), a stake he first bought in 2009 and his firm’s third-largest position.
“AngloGold offers upside in the gold space,” he said.
The stock hasn’t been a good performer in last three years, lagging behind the performance of bullion, Paulson said.
“That represents an opportunity,” he said. “The stock is a better valuation than before.”
Paulson told clients in February that gold is his best long-term bet, serving as protection against currency debasement, rising inflation and a possible euro breakup. Gold- mining companies are historically inexpensive, he said at a meeting with investors last month.
Paulson lost 6.7 percent in April and 8.8 percent this year in his Advantage Plus fund as gold-mining stocks dropped. The fund seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns.
Companies that explore for and mine the metal also were the main drivers of losses in the firm’s Advantage Fund, which employs a strategy similar to Advantage Plus, and its Gold Fund, which can buy derivatives and other gold-related investments.
Paulson & Co. sold 1.1 million AngloGold American depositary receipts in the first quarter, making the value of its stake $1.2 billion as of March 31, the New York-based firm said in a May 15 filing with the U.S. Securities and Exchange Commission.
Paulson also recommended shares of Caesars Entertainment Corp. (CZR), the largest operator of U.S. casinos.
“They are expanding, adding new facilities such as a new casino in Cleveland,” Paulson said. “They continue to pursue opportunities in Asia and the U.S.”
Caesars, weighed down by almost $20 billion in buyout debt, this week opened its first casino in five years under a growth strategy that relies on local partners for investment. It owns 20 percent of the $350 million Horseshoe Casino Cleveland and will receive fees for managing it on behalf of majority owner Rock Gaming LLC. Projects in Cincinnati, Baltimore and East Boston, Massachusetts, take a similar course.
Paulson said Caesars earnings before interest, taxes, depreciation and amortization may grow to $3.2 billion in the next several years. Ebitda was $2.1 billion last year, according to data compiled by Bloomberg.
Caesars shares have risen 50 percent since the company’s initial public offering in February to close at $13.48 yesterday in New York trading. Paulson holds 12.4 million shares of the company valued at $182.4 million, according to this week’s SEC filing.
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