Shareholder Pushes for Delek US to Sell Its C-store Business

BRENTWOOD, Tenn. — Delek US Holdings Inc. is facing some pressure to divest its convenience store business, which numbers approximately 253 locations in central and west Texas, and New Mexico.

On Jan. 14, CVR Energy Inc. sent a letter to Delek US Chairman Uzi Yemin urging the Brentwood-based company to make several changes, including selling its c-stores, and ceasing operations at the Krotz Springs and El Dorado refineries and convert them to terminals, renewable diesel production or for other purposes.

CVR Energy is majority-owned subsidiary of Icahn Enterprises LP and holds approximately 15 percent of the outstanding common stock of Delek US.

"Recent retail sales have reflected healthy multiples. Proceeds from a sale of Delek's retail assets, while retaining wholesale marketing supply, could be used to buy the 20 percent of limited partnership interests in Delek Logistics currently held by the public without experiencing earnings dilution and while strengthening Delek's balance sheet," CVR Energy said in the letter.

"Buying in the minority stake of Delek Logistics would also eliminate costs to support a second public entity. This step has been taken by a number of other refining companies in the past three years as the attractiveness to investors of refining logistics MLPs [master limited partnerships] has faded," it added.

The letter also urges Delek US to:

• Stop dropping down core refining assets into Delek Logistics Partners LP at "value-destroying prices";
• Exit non-core supply and trading activities and discontinue all other activities that add no value to its core refining business; and
• Simplify its corporate structure and reduce general and administration expenses significantly.

To read the full letter, click here.

Delek US acknowledged it received the letter from CVR Energy; however, it did not specifically address its requests.

"Delek US welcomes dialogue with its shareholders and constructive input related to enhancing shareholder value. The company's board of directors and management team are committed to acting in the best interest of all shareholders, and regularly evaluate all available options to create and deliver value," it said. "Under the leadership of an engaged and experienced board and management team, Delek US has built a broad portfolio of integrated assets in strategically important geographies, providing substantial value for its customers and partners.

"We have run at refinery utilization rates above industry average throughout 2020, driven by our positioning in attractive niche markets. Contributions from recent midstream investments are expected to gain momentum into 2021 and 2022," the company added. "In addition to strong operational performance, Delek US has a long history of returning cash to shareholders through dividends and share repurchases, amounting to approximately $265 million, or 10 percent, of market capitalization in 2019, a higher percentage than any of our peers. Since 2017, we repurchased more than $570 million of shares and paid out $280 million in dividends."

According to Delek US, its board comprises seven directors — including six independent directors. "The Nominating and Corporate Governance Committee of our Board will evaluate any nominees from CVR if and when they are received and make a recommendation in due course. Delek US shareholders are not required to take action at this time," it said.