(Bloomberg) -- CVR Energy Inc., the oil refiner controlled by billionaire investor Carl Icahn, is calling for a shakeup at Delek US Holdings Inc. while dismissing speculation of a takeover.
CVR isn’t interested in a combination but wants the fuel producer to sell its retail business and cease operations at two refineries that lack competitive advantages and have no prospect of consistently generating cash, CVR Chief Executive Offer David L. Lamp said Thursday. He added that Delek should accept the replacement of three directors with CVR nominees at the next shareholders meeting.
“Delek desperately needs new strategic direction,” Lamp said in a letter to Delek Chairman Uzi Yemin. “We would like to work collaboratively with you to replace three of your nominees at Delek’s upcoming 2021 Annual Meeting.”
CVR’s intervention comes at a time of mounting investor pressure on struggling energy companies to slash costs, cut capital spending and boost profits. Marathon Petroleum Corp., one of the largest U.S. oil refineries, agreed to sell its retail segment last year to Japanese convenience store operator Seven & i Holdings for $21 billion after pressure from activist investors. Delek’s stock is “undervalued,” Lamp said.
Delek said it welcomes dialog with shareholders and that a board committee “will evaluate any nominees from CVR if and when they are received.”
CVR is the biggest shareholder of Delek with a stake of about 15%, according to the letter. Icahn owns more than 70% of CVR. He posted an amendment to a March 2020 filing where a potential takeover of Delek was discussed, reflecting CVR CEO’s letter.
Delek rose 5.5% on Thursday, extending its increase to 87% since Icahn’s initial filing on March 19, 2020, compared with a 58% rise in the S&P 500 over the same span.
Other key Excerpts from the letter:
- “As you are no doubt aware, there have been persistent market rumors regarding our supposed interest in acquiring Delek. To set the record straight, we have no interest in doing so”
- CVR urges Delek to:
- Sell retail business “at current high prices while retaining wholesale marketing”
- Cease Delek’s refining operations at the Krotz Springs and El Dorado refineries and convert them to terminals, renewable diesel production or for other purposes
- Exit non-core supply and trading activities and discontinue all other activities that add no value to Delek’s core refining business
- Simplify Delek’s corporate structure and reduce general and administrative expense significantly
- Cease Delek’s pattern of “dropping down core refining assets into Delek Logistics Partners LP at value-destroying prices”
About the Campaign
About the Activist
About the Target
(Updates with comment from proxy letter starting in second paragraph)
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