Tender offer CVI; risk free profit?

F

freddel

Hi there,

I've a practical question related to the tender offer of Icahn over CVR energy, the last offer has expired on the 18th of May and the stock is currently trading at a 4% discount (Icahn hold 80% of the shares and the offer was $30); is there a risk free profit to make there? or the discount just reflect the time value of money until the hypothetical date when Icahn will reach the 90% cap?!

Thanks

www.theocc.com/webapps/infomemos?number=30607&date=201205
 
I've been looking at CVI and I don't understand what is going on. Risk arbitrage is not my forte but do you know what usually happens after the tender period ends and some shares have not been tendered?
 
"In the event the bidder gains 90 percent or more of the targeted shares, the bidder can, and usually does, acquire your shares compulsorily, paying you whatever was paid to those who voluntarily accepted the offer, so you are neither better nor worse off. "
 
Quote from freddel:

"In the event the bidder gains 90 percent or more of the targeted shares, the bidder can, and usually does, acquire your shares compulsorily, paying you whatever was paid to those who voluntarily accepted the offer, so you are neither better nor worse off. "
More...

Can you provide the source of this info?
 
I just bought a position there. Seems likely that either Icahn will buy the stock himself right now or he will make another tender offer soon
 
"Short-form merger: If either at the conclusion of the initial tender period or the conclusion of the Subsequent Offering Period, the Icahn Group holds 90% or more of the outstanding shares, Mr. Icahn must cause a merger to take place in which all remaining outstanding shares will be converted into the right to receive the same consideration as in the tender offer ($30 per share in cash plus a CCP), unless such holder chooses to exercise statutory appraisal rights."
http://www.marketwatch.com/story/cvr-energy-sends-open-letter-to-stockholders-2012-05-03
 
Quote from freddel:

"Short-form merger: If either at the conclusion of the initial tender period or the conclusion of the Subsequent Offering Period, the Icahn Group holds 90% or more of the outstanding shares, Mr. Icahn must cause a merger to take place in which all remaining outstanding shares will be converted into the right to receive the same consideration as in the tender offer ($30 per share in cash plus a CCP), unless such holder chooses to exercise statutory appraisal rights."
http://www.marketwatch.com/story/cvr-energy-sends-open-letter-to-stockholders-2012-05-03
More...

Seems that this only applies at the conclusion of the tender but not on an ongoing basis after the conclusion. Do you have more info on this?
 
This stock looks like a nice opportunity. I have been reading on Delaware corporate law and it seems that there quite a bit of protection for minority shareholders against low ball offers(Appraisal rights). This would be used if Icahn tried to cashout minority parties at less than $30.

http://delcode.delaware.gov/title8/c001/sc09/index.shtml#262
http://www.jonesday.com/newsknowledge/publicationdetail.aspx?publication=2716

In any event a tender for less than $30 right now would not have anyone tendering obviously

This means that if Icahn wants to merge this company with his own one he either must do another $30 tender again or buy the stock daily with a ever declining float which would drive the stock up(Specially if people realized what he is doing)

So this stock all comes down to the probability that Icahn will want to send his ownership from 80.8% to 90% in order to execute the merger. It comes down to how much a merger benefits him compared to no-merger

It seems much more likely he will want the merger instead of keeping the company as it is given all the costs of being a public company and the advantages that a merger might bring(Economies of scale, tax benefits)

The risk here is the he decides to buy a little bit of the stock every day for many months and executes the merger months from now. Then he can claim the valuation has changed and he doesn't have to pay $30 for the remaining shares . There is also risk that he won't try the merger and will just keep things they way they are right now. Seems unlikely to me, if he wanted to merge before why give up when you got almost 81%?

If I had to guess he will be buying some and then do another tender. Worst case scenario you are stuck with a company that Icahn feels that its worth at least $30 at 9 times earnings

In Sum
-He might do another tender at $30
-He will try to buy almost 50% of the float then force the merger(at $30 since less might trigger appraisal rights lawsuits)
-He will keep things as they are and you have to own a stock that Carl Icahn think its cheap. You will benefit from the board changes

Long looks good here
 
You must log in or register to reply here.
Back
Top