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 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.
“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), which last week filed plans to sell as much as $1.32 billion worth of units.
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