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Paulson Pumps CVI Contingent Value Rights, but I like this lesser-known company better



May 17, 2012 – Comments (1) | RELATED TICKERS: CVI , UAN

I mentioned this situation a little while ago. Carl Ichan is in the process of buying CVR Energy (CVI). As part of the transaction he is issuing shareholders contingent value rights that enable them to particulate in any upside should he be able to resell the company within a certain time frame.  Here's my original post on the subject:

One of the most unusual special situation investments: contingent value rights

I seriously considered buying these warrants for essentially a little under $0.30 each, when CVR was trading at a smaller premium to the buyout offer. The cost of the contingent value rights has essentially now risen to around $0.57 each, perhaps partially based on the fact that John Paulson pumped them up at the Ira Sohn stock conference. Here's what he had to say about them:

Paulson Says He Likes CVR Energy as Icahn May Resell It

I have decided to pass on CVI, through the fertilizer MLP that it created...CVR Partners (UAN) is looking mighty tasty at this level.  UAN's stock has taken some hits for a number of reasons lately, weakness in fertilizer prices, a government forecast of a huge corn crop, higher input costs for the company's key input, continued weak natural gas prices which aid its competitors and the uncertainty surrounding Ichan's purchase of its formet parent company and supplier of a input to name a few. 

Many of these issues are temporary.  Ultimately I expect global demand for fertilizer to continue to increase and at least some recovery in the price of natural gas (though not a huge one).  Furthermore, I expect Carl Ichan's purchase of CVR to be a non-issue for UAN.  CVR's major stake in UAN is extremely valuable.  Why would Ichan want to hurt that?  Doing so certainly won't help him make money. 

In the meantime, UAN is paying investors a safe 9% dividend and it is in the process of completing a major expansion that will increase its funds from operation. 

Is anyone else out there keeping an eye on UAN specifically or fetrtilizer stocks in general?  I'd love to hear your thoughts.

Thanks for reading everyone. Have a fantastic evening.


1 Comments – Post Your Own

#1) On May 17, 2012 at 4:19 PM, TMFBlacknGold (79.29) wrote:

Haha I just posted a few hours ago asking for people's comments on UAN.

My breakeven price is $20.46 so I have a safety net. I have to agree that UAN increases the value of any CVI deal. I have read that UAN will be broken up or sold for a loss, but that doesn't sound like the Icahn I read about.

I hope someone can comment further on what the takeover means for UAN... 

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