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Struggle Heats Up Over Future of Delek US

Refiner-marketer decries shareholder’s tactics as Icahn's CVR Energy files lawsuit

BRENTWOOD, Tenn. The contentious battle between refiner and convenience-store fuel retailer Delek US Holdings Inc. and Carl Icahn’s CVR Energy Inc. continues unabated. Delek US has issued a statement in connection with the proxy contest launched by CVR and has sent a letter to shareholders with a fact sheet “setting the record straight regarding recent misleading statements by CVR/Icahn,” the company said.

Meanwhile, CVR is suing Delek US over CEO Ezra Uzi Yemin’s compensation in an effort to inspect certain books and records related to CVR’s contention that Delek US’s stock is undervalued and that it could benefit from selling its more than 250 convenience stores, among other actions that CVR thinks will enhance shareholder value.

Although it has since changed its strategy, New York-based CVR—a 15% stakeholder in Delek US—initially wanted to acquire the Brentwood, Tenn.-based company. While at first CVR thought Delek US might be a good acquisition, it now says it “has no interest” in acquiring the company because of changes in the industry, and now believes Delek US can achieve greater results for its shareholders by devoting capital to other investments.

Also, CVR launched a proxy contest to replace Delek US’s directors with three “longstanding friends and former colleagues” of CVR CEO David Lamp, said Delek US.

“It is no surprise that CVR appears to be using Carl Icahn's decades old playbook of nominating friends and colleagues and making a range of misleading statements and half-truths to 'see what sticks' as it seeks to get its nominees elected,” Delek US said.

Icahn and CVR want Delek US to buy back CVR's stake in Delek US, according to Delek US. “To seek to resolve this proxy contest, we engaged in many discussions with Icahn/CVR,” Delek US said. “Not surprisingly, Icahn/CVR omitted key details in their recent materials regarding these negotiations, [including] Icahn/CVR wanted Delek to buy back a significant portion of Icahn/CVR's stake, [and] when we rejected that proposal, Icahn/CVR pushed us to conduct a hasty process to sell our retail business in order to fund a self-tender ostensibly to fund a buyback of CVR's shares in Delek.”

Delek continued, “Icahn/CVR's investment in Delek is barely a year old, and now they want us to take actions that are not in the best interests of Delek shareholders in order to fund the repurchase of their shares. This is a classic Icahn tactic from his long history of self-interested demands, but this path does not make sense for Delek shareholders.”

Responding to the litigation surrounding CEO compensation, Delek US said Yemin’s “pay has been approved by over 95% of Delek shareholders for the past three years. Concerning the books and records, it said that Delek has, in fact, responded and “provided stockholder information demanded by CVR; [however], the lawsuit seeks to obtain information that is inappropriate to share with a competitor; it makes improper demands for confidential information; it makes a number of inaccurate assertions and mischaracterizations; and is nothing more than a campaign tactic by CVR and Carl Icahn to generate interest in their unnecessary proxy contest.”

In a Securities and Exchange Commission (SEC) filing, which includes a timeline of the proxy contest, CVR also says Delek US’s board has “wasted resources,” “made questionable operating decisions,” misled “stockholders about CVR’s intentions” and that its “incumbent directors are entrenched and beholden to Mr. Yemin.”

Delek US is a diversified downstream energy company with assets in petroleum refining, logistics, asphalt, renewable fuels and convenience-store retailing. The refining assets consist of refineries operated in Tyler and Big Spring, Texas, El Dorado, Ark., and Krotz Springs, La. The c-store business operates more than 250 locations in central and west Texas and New Mexico. Delek US is the largest 7-Eleven licensee in the United States, although the companies have agreed to exit the licensing agreement. The retail c-store business has launched a new c-store brand, DK, and will rebrand all of the 7-Eleven stores by the end of 2021.

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