Carl Icahn Discloses Stake in Rentech Nitrogen Partners LP (RNF) Under Merger with CVR Partners LP (UAN)

Billionaire activist investor Carl Icahn has disclosed a 59.7% stake in Rentech Nitrogen Partners LP (NYSE:RNF), which contains 23.25 million common units representing limited partner interests, and which was obtained following the company’s merger with CVR Partners LP (NYSE:UAN). CVR Partners was formed by CVR Energy, Inc. (NYSE:CVI) to operate its nitrogen fertilizer business. CVR Energy subsidiaries own a majority of CVR Partners common stock, while Icahn controls around 80% of CVR Energy. Carl Icahn’s firm, Icahn Enterprises LP (NASDAQ:IEP), and its affiliates received the shares under the terms of a Voting Agreement with Rentech.

Carl Icahn - Icahn Capital Lp

The execution of the merger between Rentech Nitrogen Partners LP (NYSE:RNF) and CVR Partners LP (NYSE:UAN) was announced on August 10. Under the terms of the merger agreement, CVR Partners will acquire all outstanding units of Rentech Nitrogen, excluding the latter’s Pasadena facility, which will remain under control of the current holders of Rentech Nitrogen or will be sold for their benefit. Following the combination of both companies, Rentech’s shareholders will receive 1.04 units of CVR Partners and $2.57 in cash. In this way, the value of the deal amounts to $533 million, and implies an Enterprise Value of around $839 million. After the merger is completed, the holders of Rentech Nitrogen units, will own around 35.6% of the combined company. Moreover, CVR Partners LP (NYSE:UAN) will assume or refinance Rentech’s debt, which stood at around $307 million at the end of March.

Rentech Nitrogen Partners LP (NYSE:RNF) is a $590 million master limited partnership that owns and operates a fertilizer business. The company has recently reported its financial results for the second quarter and announced a cash distribution of $1.00 per common unit. Rentech delivered revenue of $109.9 million during the second quarter, down from $113.6 million a year earlier, while its gross profit surged to $44.7 million from $28.2 million.

Other shareholders of Rentech include Jeff Buick’s Trishield Capital Management and Glenn W. Welling’s Engaged Capital, both of which increased their stakes during the second quarter and reported holding 392,980 units and 96,201 units respectively in their latest 13F filings.

Carl Icahn is considered one of the best activist investors on the Street and his moves are always scrutinized. We follow Icahn as part of our small-cap strategy, which involves imitating a portfolio of 15 most popular small-cap stocks among a pool of over 700 large money managers. We determined that this approach can help a retail investor generate market-beating returns over the long-term and obtain larger profits than by imitating hedge funds’ top picks, which are usually represented by large- and mega-cap companies. Since we launched our strategy in August 2012, it returned around 123%, outperforming the S&P 500 ETF (SPY) by some 65 percentage points.

The aforementioned CVR Energy, Inc. (NYSE:CVI), in which Icahn owns around 80% of the outstanding stock, represents the investor’s third-largest holding, valued at some $2.79 billion as of the end of March. Aside from the fertilizer business conducted through CVR Partners, CVR Energy is also engaged in petroleum refining through another master limited partnership, CVR Refining LP (NYSE:CVRR), which was spun-off in 2012, soon after Icahn seized the control of the CVR Energy’s board.

Disclosure: none