Attached files
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| 8-K - FORM 8-K - CVR PARTNERS, LP | d94196d8k.htm |
 August 10, 2015 Creation of A Leading Nitrogen Fertilizer MLP Announcing the Merger of CVR Partners and Rentech Nitrogen Partners Exhibit 99.1 |
 2 Safe Harbor Statement Additional Information About the Proposed Transaction In connection with the proposed transaction, CVR Partners, LP (“CVR Partners”) intends to file a registration statement on Form S-4
that will include a prospectus of CVR Partners and a proxy statement of
Rentech Nitrogen Partners, L.P. (“Rentech Nitrogen”), and CVR Partners and Rentech Nitrogen intend to file other documents, with the Securities and Exchange Commission (the “SEC”). INVESTORS ARE URGED TO
READ THE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED
WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. A definitive proxy statement / prospectus will be sent to unitholders of Rentech Nitrogen seeking their approval of the transaction. Investors
and security holders may obtain a free copy of the definitive proxy
statement / prospectus (when available) and other documents filed by CVR Partners and Rentech Nitrogen with the SEC at the SEC's website, www.sec.gov. The definitive proxy statement / prospectus (when available) and such
other documents relating to CVR Partners may also be obtained free of
charge by directing a request to CVR Partners LP, Attn: Investor Relations,
2277 Plaza Drive, Suite 500, Sugar Land, TX 77479. The definitive proxy statement /
prospectus (when available) and such other documents relating to Rentech
Nitrogen may also be obtained free of charge by directing a request to Rentech Nitrogen Partners, L.P., Attn: Investor Relations, Julie Dawoodjee Cafarella, 10877 Wilshire Blvd., 10th Floor, Los Angeles, CA 90024. Participants in the Solicitation
CVR Partners, Rentech Nitrogen and their respective directors and
executive officers may, under the rules of the SEC, be deemed to be
"participants" in the solicitation of proxies in connection with the proposed
transaction. Information regarding directors and executive officers of
CVR Partners’ general partner is contained in CVR Partners’ Form 10-K for
the year ended December 31, 2014, which has been filed with the SEC.
Information regarding directors and executive officers of Rentech Nitrogen’s general partner is contained in Rentech Nitrogen’s Form 10-K for the year ended December 31, 2014, which has been filed with the SEC. A more complete description will be available in the registration
statement and the proxy statement/prospectus. This document shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of such securities, in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to appropriate registration or qualification under the securities laws of such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933, as amended. Forward-Looking Statements
This presentation may include certain statements concerning
expectations for the future that are forward-looking statements as defined by federal law. Such forward-looking statements are subject to a variety of known and unknown risks, uncertainties, and other factors that are difficult
to predict and many of which are beyond CVR Partners’ and Rentech
Nitrogen’s control, including the ability to consummate the proposed
transaction; the ability to obtain the requisite regulatory approvals, Rentech Nitrogen
unitholder approval, the ability of Rentech Nitrogen to divest or
distribute its Pasadena facility, and the satisfaction of other conditions to consummation of the transaction; the ability of CVR Partners to successfully integrate Rentech Nitrogen’s operations and employees; the ability to realize anticipated synergies and cost savings; the
potential impact of announcement of the transaction or consummation of
the transaction on relationships, including with employees, suppliers, customers and competitors; the ability to finance the combined company; and the ability to achieve revenue growth. An extensive list of factors that can
affect future results are discussed in CVR Partners’ Annual Report
on Form 10-K, Rentech Nitrogen’s Annual Report on Form 10-K and other documents filed from time to time with the SEC. CVR Partners and Rentech Nitrogen undertake no obligation to update or revise any
forward- looking statement to reflect new information or events. |
 3 Presenters John "Jack" Lipinski Executive Chairman CVR Partners, LP Mark A. Pytosh Chief Executive Officer & President CVR Partners, LP Keith B. Forman Chief Executive Officer Rentech Nitrogen Partners, L.P. |
 4 Combination Overview Consideration • CVR Partners (“UAN”) to acquire all units of Rentech Nitrogen Partners (“RNF”) through merger, which excludes
Pasadena: -
1.04 units of UAN and $2.57 in cash for each unit of RNF (1) - 81% units / 19% cash (2) • Value of $14.88 based on UAN closing prices on 2/16/15 (3) and $13.69 based on UAN closing prices on 8/7/15 (excl. Pasadena) Premiums • 20.3% premium (4) implied from unaffected exchange ratio on 2/16/15 (3) • 32.9% premium (4) at the current exchange ratio (as of 8/7/2015) • 14.1% premium (4) implied from last 30-day VWAP exchange ratio (as of 8/7/2015) Pro Forma Ownership • Existing UAN Unitholders: ~64.4% – CVI: ~34.1% (5) • Existing RNF Unitholders: ~35.6% – Rentech, Inc.: ~10.1% (6) ; GSO (Blackstone): ~11.2% (6) ; Public RNF Unitholders: ~14.4% (6) 1. No financing condition 2. Based on market data as of 8/7/2015 3. One day before strategic alternatives process was publicly announced by RNF 4. For detailed calculation, please refer to page 12 5. Icahn Enterprises owns ~82% of CVI common stock 6. Rentech, Inc. will exchange a portion of the CVR Partners units it receives for $140 million of securities held by GSO Capital Partners, at a CVR unit price to be determined based on a 15% discount to the pre-closing VWAP. The percentages listed above assume that the pre-closing VWAP is equal to the pre-signing VWAP for the period ended August 7, 2015 Pasadena • RNF unitholders to retain value of Pasadena facility; RNF to sell or spin Pasadena facility prior to closing
Timing • Target closing by December 31, 2015. No later than May 31, 2016 Approvals • No unitholder vote required at UAN; Unitholder vote required at RNF • Rentech, Inc. (59.7% ownership in RNF) has entered into a support agreement, pursuant to which it will vote all of its common
units for the merger
• Subject to regulatory approvals Governance & Leadership • Board to increase from 7 to 11 Members: 2 designees appointed by CVR Energy, Inc.; 2 by Rentech, Inc.
• Executive Chairman: Jack Lipinski, CEO: Mark Pytosh, CFO: Susan Ball Advisers • Morgan Stanley served as sole financial adviser to RNF. Latham & Watkins served as legal adviser
• Vinson & Elkins served as legal adviser to UAN Financial Impact • Combination achieves double-digit accretion for UAN unitholders’ DPU before estimated annual run-rate synergies of at least
$12MM |
 5 Combination Highlights 1. Based on market data as of 8/7/2015 2. Comprises of ~1.2MM tons of combined UAN products, ~350k tons of ammonia products and ~300k tons of other products
3. Eliminates single ammonia / UAN production facility risk for both UAN and RNF A leading North American nitrogen fertilizer producer • Over $1.6Bn pro forma enterprise value (1) • ~1.9MM annual sellable tons of nitrogen products (2) • Strong margins relative to peers Diversification reduces risk • Asset diversification Eliminates single facility risk for both partnerships (3) • Geographic diversification • Markets diversification • Feedstock diversification Natural gas and pet coke Both sets of unitholders participate in value creation • Attractive valuation for RNF unitholders • RNF unitholders to retain value of Pasadena • Significantly accretive to UAN’s expected distributions per unit Value creation from estimated annual run-rate synergies of at least $12MM • Straightforward integration Combine 2 standalone facilities • Reduction of public company costs Strategic platform for growth, as the industry consolidates • Attractive market position • Strong combined balance sheet • Increased capital markets liquidity |
 13.0 10.2 5.4 4.5 2.8 2.3 1.5 1.3 1.1 0.4 CF Potash Agrium Koch UAN / RNF Yara UAN RNF LSB OCI A Leading North American Nitrogen Fertilizer Producer Source: 2014 10K Filings, public disclosures 1. Assumes production 365 days a year for calculation of capacity 2. Current annual capacity not pro forma for expansions coming online in 2015 and 2016 nor acquisition of OCI NV businesses; includes Terra Nitrogen
LP, which is 75% owned by CF 3.
Represents nitrogen segment volume
4. East Dubuque only (MM Short Tons) North American Nitrogen Fertilizer Production Capacity (1) (2) (3) (4) 6 |
 Strong
Margins ($ / Ton)
2014 Gross Margin per Ton (1) $186 $184 $142 $141 $133 $128 0 50 100 150 200 Rentech Nitrogen Potash CVR Partners Agrium CF Yara (2) Source: Company Filings 1. Based on total fertilizer product tons; gross margins exclude depreciation and amortization expenses
2. East Dubuque only 3. Gross margin adjusted for $10.5MM of one-time increase in distribution costs; the increase in distribution costs was driven by a larger portion of UAN’s fleet due for regulatory inspections and related repairs (3) 7 |
 8 Feedstock Highlight Acreage Shipping 2014 Revenue Mix Key Markets • Natural gas • Located in the heart of the Mid Corn Belt • Premium pricing due to advantageous location • Relatively low cost North America natural gas as feedstock • 210 acres (140 feet above the Mississippi River) • Primarily at plant gate to customers' trucks • Barge and rail access • Mid Corn Belt (within 200 miles of the facility) Ammonia 43% UAN 38% Urea 13% CO2 1% Other 3% Nitric Acid 2% East Dubuque, IL Facility • Petroleum coke • Located in Kansas, adjacent to CVR Refining’s facility • Uses unique petroleum coke gasification process, also known as clean coke technology with CO 2 captured • 60 acres • Primarily rail with some truck • Southern Plains Coffeyville, KS Facility UAN 92% Ammonia 4% Hydrogen 3% Other 1% Diversification for Unitholders of Both MLPs • Well-positioned to capitalize on favorable North American nitrogen industry fundamentals
• Eliminates single facility risk for both partnerships (1) 1. Eliminates single ammonia / UAN production facility risk for both UAN and RNF |
 9 Combines Complementary Strengths in Nitrogen Value Contributed by CVR Partners Value Contributed by Rentech Nitrogen Location in Southern Plains and premium product focus Mid Corn Belt location resulting in higher net sales prices for ammonia and UAN Nitrogen fertilizer pure play Nitrogen fertilizer pure play Stable and low input prices Low U.S. natural gas feedstock / input prices UAN capacity expansion completed Urea and ammonia production capacity expansion completed Payout 100% of available cash each quarter Payout 100% of available cash each quarter Experienced management Experienced facility management Current projects expected to generate incremental EBITDA Current projects expected to generate incremental EBITDA • Bringing the two companies together will enhance the execution of their respective strategies
• Compelling logic for combination has been in place since both MLPs went public in 2011 |
 10 Attractive Location for Nitrogen Fertilizer Plants Benefits of Location Attractive Market Position Coffeyville Facility, KS • Strategic location in the Southern Plains • Located on Union Pacific mainline • Transportation cost advantage to Southern Plains vs. U.S. Gulf Coast East Dubuque Facility, IL • Entire market within a 200-mile radius • In the center of the Mid Corn Belt – the largest nitrogen market and top corn producing region • Transportation cost savings compared to product shipped into region Combined • Storage at facilities allow for better timing of product pick-up / application by customers than competitors located outside of the region • Region relies on imports from other parts of the U.S. to meet demand • Strong market for ammonia and UAN Source: Company Information Rentech Nitrogen Partners (East Dubuque, IL) Nitrogen Fertilizer Facilities Union Pacific Mainline Distribution CVR Partners (Coffeyville, KS) NM TX OK KS NE SD ND MT WY CO UT ID AZ NV WA CA OR KY MI OH IN IL TN AL AR LA MO IA MN WI MS |
 11 0% 20% 40% 60% 80% 100% Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Well-Structured, Fairly Timed Transaction Last Twelve Months Relative Market Capitalization (1) 2/17/15 RNF announces exploration of strategic alternatives Source: Capital IQ as of 8/7/2015 1. Illustrated on rolling 5-day average RNF Current : 34% LTM Average: 35% UAN Current : 66% LTM Average: 65% • High degree of correlation in RNF and UAN unit prices over time • At-market ownership split in-line with average relationship • Combination exchange ratio delivers ~64/36 ownership split; RNF unitholders receive majority of premium
by virtue of cash consideration |
 12 1. Market data as of 8/7/2015 2. RNF balance sheet data as of 3/31/2015; UAN balance sheet data as of 6/30/2015 3. Includes cash offer 4. Reflects IBES consensus estimates for UAN and RNF (includes Pasadena unless otherwise noted)
5. Reflects Wall Street analyst estimates for RNF excluding Pasadena 6. One day before strategic alternatives process was publicly announced by RNF 7. The 30-Day VWAP exchange ratio of 1.093x as of August 7, 2015 is calculated as the 30-Day VWAP of RNF divided by 30-Day VWAP of
UAN 8. The implied unit prices are calculated as the exchange ratios multiplied by the 30-Day VWAP of UAN
Attractive Valuation for RNF Unitholders
(5) (5) (3) • Offer value (excluding Pasadena) of $13.69 as of August 7 or $15.47 based on last 30-day VWAP
(5) (5) (3) (7) (8) ($MM, except unit price) (1) Based on Latest Closing Prices Based on VWAP of the Last 30 Days UAN at Market (2) RNF at Market (2) RNF at Offer UAN at Market (2) RNF at Market (2) RNF at Offer Unit Price (8/07/2015) $10.69 $10.30 $13.69 $12.40 $13.56 $15.47 Units Outstanding (MM) 73.1 38.9 38.9 73.1 38.9 38.9 Equity Value 782 401 533 907 528 602 Plus: Debt 125 339 339 125 339 339 Less: Cash (67) (32) (32) (67) (32) (32) Enterprise Value 840 708 839 965 834 909 Enterprise Value / EBITDA Multiples (excludes synergies) (4) 2015E EBITDA 7.4x 7.0x 8.1x 8.5x 8.3x 8.8x 2016E EBITDA 7.4x 7.2x 8.3x 8.5x 8.5x 9.0x Unit Exchange Ratio Implied Unaffected RNF Unit Price Implied Premium Unit Exchange Ratio Implied Unaffected RNF Unit Price Implied Premium Unaffected Exchange Ratio (2/16/2015) (6) 1.064x $11.38 20.3% 1.064x $13.20 17.2% Average Unaffected Exchange Ratio 90 Days Prior to 2/16/2015 (6) 1.025x $10.96 24.9% 1.025x $12.71 21.6% At-Market Current Exchange Ratio (8/7/2015) 0.964x $10.30 32.9% 1.093x $13.56 14.1% |
 13 • The transaction is expected to be double-digit accretive to UAN unitholders before synergies $217MM of 2015E pro forma EBITDA (1) • Expected synergies would further enhance accretion to UAN Annual run-rate synergies of at least $12MM Significant savings are expected to come from a reduction in corporate expenses, logistics and procurement improvements and more efficient marketing of combined products • RNF unitholders to share in these benefits by virtue of ownership in combined partnership Significant Value Creation for Both Sets of Unitholders 1. Reflects RNF and UAN 2015E EBITDA based on IBES consensus estimates as of 8/7/2015 |
 14 Strong Combined Financial Profile Selected Balance Sheet Statistics (as of March 31, 2015) ($MM) UAN RNF Combined (2)(3) (1) 113 103 217 Cash Equivalents 73 32 105 125 339 564 Debt 52 307 459 (1)(2) 0.5x 3.0x 2.1x (5) 782 401 1,183 (5) 330 160 490 (5) 834 708 1,642 1. Reflects UAN 2015E EBITDA based on IBES consensus estimates as of 8/7/2015. RNF based on Wall Street analyst estimates for RNF excluding
Pasadena 2.
No synergies assumed 3. Assumes cash portion of merger consideration is debt financed 4. RNF cash balance includes Pasadena, the amount of which may not be part of the transaction
5. Market data as of 8/7/2015 • Over $1.6Bn pro forma Enterprise Value (4) |
 15 Pasadena: RNF Unitholders to Retain Value Pasadena Process Overview • RNF unitholders to retain value of Pasadena facility by either: – Selling Pasadena prior to closing and receiving proceeds; or – Receiving interests in entity that owns Pasadena, which would later be sold Asset Overview • Primary product: Ammonium sulfate – Inputs: Ammonia and sulfur • Located on ~85 acres in Pasadena, Texas • 2 deep-water docks; access for international deliveries • Rail service by BNSF and Union Pacific • Advantage for distributing product west of the Mississippi • Unit trains allow for favorable transportation costs • Easy access to several interstate highways Asset Map Byproduct Synthetic Product type Areas of RNF marketing focus Planned Power Project Generation Site Planned Power Project Generation Site Ammonium Thiosulfate Storage Tanks Ammonium Thiosulfate Storage Tanks Ammonia tank Ammonia tank Sulfuric acid plant Sulfuric acid plant Granulation Granulation |
 16 Conclusion 1. Based on market data as of 8/7/2015 2. Comprises of ~1.2MM tons of combined UAN products, ~350k tons of ammonia products and ~300k tons of other products
3. Eliminates single ammonia / UAN production facility risk for both UAN and RNF A leading North American nitrogen fertilizer producer • Over $1.6Bn pro forma enterprise value (1) • ~1.9MM annual sellable tons of nitrogen products (2) • Strong margins relative to peers Diversification reduces risk • Asset diversification – Eliminates single facility risk for both partnerships (3) • Geographic diversification • Markets diversification • Feedstock diversification – Natural gas and pet coke Both sets of unitholders participate in value creation • Attractive valuation for RNF unitholders • RNF unitholders to retain value of Pasadena • Significantly accretive to UAN’s expected distributions per unit Value creation from estimated annual run-rate synergies of at least $12MM • Straightforward integration Combine 2 standalone facilities • Reduction of public company costs Strategic platform for growth, as the industry consolidates • Attractive market position • Strong combined balance sheet • Increased capital markets liquidity |
 17 Next Steps Merger Agreement signed on August 9, 2015 Rentech Nitrogen to immediately launch process to sell or spin Pasadena Regulatory approvals Approval by Rentech Nitrogen unitholders Pasadena sale or spin closing (before closing of merger) Target merger closing by December 31, 2015 (no later than May 31, 2016) |