3rd UPDATE: Icahn Gets Majority Support In CVR Tender Offer; To Replace 7 On Board

Carl Icahn may have won the support of a majority of CVR Energy Inc. (CVI) shareholders in his hostile takeover bid, but the billionaire investor faces a potentially steeper climb in the next step of his plan--finding a buyer for the petroleum-refining and marketing company.

Icahn, one of CVR's largest shareholders, in February launched a tender offer worth $30 a share plus a contingent value right. As of Friday night, roughly 63% of CVR shares unaffiliated with Icahn had been tendered in support of his bid, giving him majority ownership of the company and its two refineries in Oklahoma and Kansas.

CVR's refineries are ideally placed to take advantage of the boom in North America oil production. CVR buys oil produced in North Dakota, Canada and other midcontinent regions and sells its finished fuel at prices closer to that charged by refiners dependent on more expensive coastal crudes. The price discrepancy gave the CVR refineries a first-quarter gross profit margin of more than $20 a barrel.

But with more fuel-efficient vehicles and increased use of biofuels cutting into long-term fuel demand, Icahn may find it difficult to attract customers at the $37 a share he said he will seek for CVR's two refineries.

"I'm not sure anyone is interested in buying refineries," said Morningstar analyst Allen Good.

Potential suitors include Marathon Petroleum Corp. (MPC), HollyFrontier Corp. (HFC), Tesoro Corp. (TSO) and Western Refining Inc. (WNR), all of whom are based in the same region as CVR and recently have said they were on the lookout for potential acquisitions. The latter two companies have debt issues that could squelch a potential deal, while the former may blanch at Ichan's asking price, analysts said.

HollyFrontier spokesman Neale Hickerson declined to comment on whether the company was interested in CVR's refineries but said refining-asset prices seemed inflated in general.

"The problem now is that refining margins so high, everyone has a robust view of what their assets are worth," Hickerson said.

Spokesmen for Marathon Petroleum and Western Refining declined to comment. A spokeswoman for Tesoro wasn't immediately available.

Icahn scored a victory in his battle for CVR last month when a majority of the company's outstanding shares were tendered in favor of his offer. The show of shareholder support prompted the CVR board to strike an agreement with Icahn that lifted a so-called poison pill blocking hostile takeovers and allowed him to push ahead with his bid.

Per his agreement with the company, Icahn will replace seven members of CVR's nine-member board with individuals of his choosing.

In addition, Icahn is commencing a subsequent offering period for shares that haven't already been tendered. That offer will expire at 11:59 p.m. EDT on May 18.

"We are pleased with the results of our tender offer and are excited to have CVR join the Icahn Enterprises family," Icahn said Monday. "We look forward to working together with the CVR team."

A spokeswoman for the company declined to comment.

Shares of CVR were up 1% at $30.35 in recent trading Monday afternoon. The stock has surged 62% since the start of the year.

-By Ben Lefebvre and Mia Lamar, Dow Jones Newswires; 713-547-9201; ben.lefebvre@dowjones.com; Twitter: @bjlefebvre

CVR Energy (NYSE:CVI)
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