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Delek Gulps Poison Pill After Icahn Buys 14.8% of its Stake

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Delek US Holdings, Inc. (DK - Free Report) recently announced its adoption of a limited-duration stockholder rights plan and declared a dividend of one "Right" for each outstanding share of Delek common stock payable to its shareholders of record on Mar 30, 2020. Shares of Delekjumped 30% in Friday’s trading following this news. The move comes after Icahn Enterprises L.P. (IEP - Free Report) had accumulated a 14.86% stake in the company and held talks with management.

Activist investor Carl Icahn purchased a portion in Delek with an intention to combine the refiner CVR Energy , in which it held 71% ownership, with the company. This is because the merger of both will strengthen the footprint of this geographically-varied inland refiner with greater availability of crude at more reasonable value in Cushing, OK and the Permian where Delek owns the Big Spring refinery besides Canada.

Per Delek, the rights pact was followed as the company's present share value does not mirror its inherent long-term worth, thanks to the coronavirus pandemic that turned most sectors topsy-turvy until now.

China's fuel demand is visibly crippled in the aftermath of large-scale travel bans imposed globally. To worsen matters, oil prices plummeted as Saudi Arabia waged a price war and ramped up its oil production significantly in retaliation to Russia’s resistance to lower its crude production at the OPEC meeting. As of Thursday, Delek stock has lost 65.6% year to date compared with 62.2% decline of the industry it belongs to.

Management at this Brentwood, TN-based confirmed that the rights plan will be exercised when an investor accumulated more than 15% of a stock, contingent upon customary conditions. The plan will provide stockholders with the right to purchase shares at a discounted price, which will dilute the stock and prevent a hostile takeover. 

In a separate press release, earlier this month, a source informed that activist investor Carl Icahn expanded his interest in Occidental Petroleum (OXY - Free Report) to almost 10% and doubled down on a fight to take control of the oil producer.

About the Company

Delek is an independent refiner, transporter and marketer of petroleum products. This Zacks Rank #4 (Sell) company’s operations are organized under three reportable segments: Refining, Logistics and Retail.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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