CVR Energy Inc. announced May 29 an exchange offer to acquire common units of its refining master limited partnership that values the petroleum refiner at $795.8 million.
Under the proposed exchange, CVR Energy would acquire up to 37,154,236 common units of CVR Refining LP at an exchange ratio of 0.6335 shares of CVR Energy common stock per common unit of CVR Refining.
At $27.63 per common unit, the offer represents a 25% premium over CRV Refining's closing price on May 25.
The proposed deal highlights a trend moving away from the partnership structure that investors used to seek out for its tax advantages.
"CVR Energy believes that, in light of recent tax reform, many CVR Refining unitholders may wish to hold their investment in the form of common stock rather than partnership interests," CVR Energy said in a May 29 statement. "An exchanging unitholder will also participate directly in the performance of CVR Energy … including any future premium that may be received by stockholders of CVR Energy in connection with a sale or other corporate transaction."
The company announced the same day a second-quarter cash dividend of 75 cents per share, representing an annualized increase of $1.00 per share, to be paid on Aug. 13 to shareholders of record on Aug. 6.
CVR Energy said the commencement of the exchange offer is subject to regulatory approval and that the deal's closure would be subject to CVR Energy and its affiliates, including Icahn Enterprises LP, owning more than 80% of the common units of CVR Refining.
Under CVR Refining's partnership agreement, once the general partner and its affiliates own more than 80% of the common units of CVR Refining, those entities have the option to purchase all outstanding units of the master limit partnership owned by unaffiliated entities at or above the current market price of those units.
CVR Energy said neither it nor its affiliates have current plans to exercise the call option.
CRV Energy shareholders will vote on the proposed exchange during the company's June 13 annual shareholder meeting.
