Potential takeover bid prompted by desire to sell CVR at a premium to other US refiners.

CVR Energy, the operator of the 115,000bpd Coffeyville refinery in Kansas and the 70,000bpd Wynnewood refinery in Oklahoma, together with a nitrogen fertiliser plant, has announced that it has received notice from Icahn Partners LP of its intent to acquire all outstanding CVR shares for US$30 per share in cash.

According to a statement from CVR, Carl Icahn, who controls Icahn Partners, has also given CVR notice that he is seeking to nominate nine directors to the company’s board of directors at the next annual meeting, five of whom are his employees and that he will submit a shareholder proposal.

Deutsche Bank and Goldman Sachs are acting as CVR Energy’s financial advisors and Wachtell, Lipton, Rosen & Katz is serving as the company’s legal adviser.

According to a statement posted on the website of Icahn Enterprises, Icahn believes CVR Energy should be put up for sale and if the current CVR board puts it up for sale prior to the initial expiration date of Icahn’s tender offer (which it expects to be on or around March 23) then Icahn reserves the right to withdraw the tender offer and proxy fight.

"We are launching this tender offer and proxy fight to provide shareholders with the opportunity to obtain the value that we believe can be obtained in a sale of the company. We are offering shareholders a minimum of $30 per share now, a new board with a shareholder mandate to put the company up for sale, and the upside from a sale of the company in the form of the contingent value right. This is a win-win-win for shareholders,” says Icahn.

Icahn believes the sale of CVR “should attract the interest of potential buyers such as Western Refining, HollyFrontier, Tesoro Corp, Valero, Marathon Petroleum Corp or ConocoPhillips, among others”. He also believes that in the event of such a sale a price of at least US$37 per share would be achieved, which would represent a premium of 34.1% over the closing price seen on February 15, and put CVR’s market capitalisation at US$3.25 billion.

Icahn’s analysis partly hinges on the assumption that a buyer would be able to realise synergies from the integration of CVR’s refineries into its own operations, “largely due to corporate cost savings and other potential operating synergies, as well as a greater ability to hedge high crack spreads”.

CVR Energy has a blended complexity of 11.5 and has access to WTI priced crudes, being located 100 miles from the hub at Cushing. In an investor presentation, it reported a refining margin of US$20.01 and direct operating expenses of US$4.56/bbl. Total Ebitda for 3Q11 came in at US$696 million. Refinery utilisation in 3Q11 was close to 100% for the first nine months of 2011.