U.S. refiner CVR Energy Inc, majority-owned by billionaire-investor Carl Icahn, said on Thursday it was not interested in buying peer Delek US Holdings Inc and proposed to replace three Delek board nominees with its own.
CVR, which owns about 15% of Delek and is its largest stockholder, said it would instead focus on devoting capital to internal higher-return projects, according to a regulatory filing, which cited a letter to Delek from CVR Energy Chief Executive Officer David Lamp.
Lamp cited the dramatic changes in the industry since it started buying shares of Delek as one of the reasons it was not pursuing an acquisition.
Responding to CVR’s letter, Delek said it welcomes dialogue with its shareholders and constructive input related to enhancing shareholder value.
The company added that its nominating and corporate governance committee will evaluate any nominees from CVR if and when they are received, and make a recommendation in due course.
Lamp said CVR continues to believe Delek’s stock is undervalued and the company would benefit by prioritizing free cash flow over growth, and focusing on core refineries while exiting from others.
Oil refineries have been facing a wave of closures due to plateauing fuel demand, tightening environmental rules and increased competition.
CVR urged Delek to cease refining operations at the Krotz Springs and El Dorado refineries in the U.S. and convert them to terminals, for renewable diesel production or other purposes.
“Generally when activists get involved in energy equities, they tend to outperform … CVI is making it very clear they have no intentions of acquiring DK. So, we expect the positive reaction to be more muted,” Credit Suisse analyst Manav Gupta wrote in a note.
Delek’s shares halved in 2020, while CVR’s stock fell 63%.
Source: Reuters.com