American billionaire Carl Icahn’s CVR Energy buys two Marathon refineries for $4.2 billion

American billionaire Carl Icahn’s CVR Energy has agreed to buy two U.S. refineries and a fuel marketing business from Marathon Petroleum for about $4.2 billion, a deal that would almost double the refiner’s processing capacity.

CVR, which Icahn controls with about 71% of the shares, is buying the St. Paul Park refinery in Minnesota and the Mandan refinery in North Dakota, plus a marketing business that supplies up to 590 branded fuel stations, IBTimes reported. The price excludes net working capital.

The two plants can process a combined 177,000 barrels of crude a day, Reuters reported. As a result, CVR’s capacity would rise to about 384,000 barrels a day from about 207,000. Marathon will receive $3.45 billion for the refineries, while its pipeline unit MPLX will get $750 million for related infrastructure.

CVR plans to pay with $2.5 billion in committed secured debt, cash on hand and two equity commitments. Its controlling shareholder has committed $500 million, and trading house Trafigura will invest $800 million. Trafigura will also become the refineries’ exclusive crude supplier, according to Reuters.

Alongside the deal, CVR announced a $750 million stock offering. Of that, CVR will sell $500 million of new shares, while a subsidiary of Icahn Enterprises will sell $250 million, and CVR will receive none of that money.

Investors did not welcome the dilution. CVR’s shares fell about 12% to $49.37 in morning trading on Tuesday, leaving the company worth roughly $5 billion. The stock had risen about 7% before the market opened, after CVR posted record quarterly results.

Those results were strong. CVR earned $570 million, or $5.67 a share, in the third quarter, up from $374 million a year earlier. Revenue rose 69% to $3.28 billion. Adjusted earnings of $4.00 a share beat the consensus estimate of about $2.46.

“We are acquiring 2 well-maintained, highly productive refineries from Marathon,” Chief Executive Officer Dane Neumann said. The deal is expected to close by the end of the year, subject to regulatory approvals.

The sale comes at a profitable moment for U.S. refiners. Marathon’s refining margin more than doubled to $45.70 a barrel in the quarter, as fuel supply disruptions tied to the wars in Iran and Ukraine lifted prices, Reuters reported. Marathon beat estimates with adjusted earnings of $26.93 a share and plans to reinvest the proceeds mainly along the U.S. Gulf Coast.

Meanwhile, Icahn has been reshaping his holdings. Last month he sold the former Trump Plaza casino site in Atlantic City for $6.6 million. Icahn Enterprises, his listed holding company, holds his stake in CVR, and a unit of that company is now selling part of it through the new share offering.