In unusual lawsuit, CVR investors seek poison pill

Thu Jun 7, 2012 3:49am IST

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* Pension funds seek to stop Icahn from buying more shares

* Accuse Icahn of boosting position at less than fair value

June 6 (Reuters) - Shareholders often sue corporate directors when they adopt poison pills to fend off mergers.

Investors in CVR Energy Inc filed a lawsuit late on Tuesday that does the opposite, they are seeking to force the board, which is led by Carl Icahn, to adopt the defensive measure.

Two pension funds asked Delaware's Court of Chancery to order the board of CVR to adopt a poison pill that will prevent Icahn from buying more shares in the oil refiner and fertilizer maker.

The lawsuit seeks class action status.

Icahn, a billionaire investor, won control of the company in May after he obtained 63 percent of the company's stock through a $30-per-share tender offer.

After extending the tender offer deadline, he eventually obtained 80 percent of CVR stock.

However, at that point he did not announce his intention to conduct a back-end merger to obtain the rest of the stock and the company's shares began falling, losing around 20 percent of their value, according to the lawsuit.

"Icahn seized this opportunity to increase his position without having to pay fair value to the remaining minority shareholders," according to the lawsuit by the City of Tamarac Firefighter Pension Trust Fund and the City of Miami General Employees' and Sanitation Employees' Retirement Trust.

Icahn is now using a "squeeze-out scheme" to accumulate more than 90 percent of CVR's shares on the open market, according to the complaint. That would allow him to forcibly acquire the remaining shares in a short-form merger under Delaware law.

Icahn did not immediately respond to a request for comment.

The two funds also seek a court order preventing Icahn from buying more CVR stock in the open market on terms less favorable than he offered in the tender.

The case is City of Tamarac Firefighter Pension Trust Fund et al v Carl C. Icahn et al, Delaware's Court of Chancery, no. 7597.

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