CVR Energy (CVI) Releases Open Letter to Uzi Yemin, Chairman of the Board of Delek US Holdings (DK)
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March 19, 2021
Via Email Uzi YeminChairman of the BoardDelek US Holdings, Inc.7102 Commerce WayBrentwood, TN 37027
|Re:||An Open Letter to Uzi (Mr. 5%) Yemin:|
|You Can Run But You Can’t Hide (from Your Stockholders)|
On March 1, 2021, we sent Delek US Holdings, Inc. (“Delek” or the “Company”) a letter asking for information relating to your compensation from Delek and its subsidiary, Delek Logistics Partners (“Logistics”).
We did so because in our opinion the publicly available information on your compensation is—to put it mildly—both highly unsettling and murky.
Delek’s public filings indicate that you received total compensation of nearly $54 million from 2013 to 2020. We believe that is an enormous amount of compensation for the Chief Executive of a company that has made as many apparent blunders as Delek has made over those years.
But what makes that number even more incredible in our view is that it apparently does not include the approximate $27 million you received (apparently in cash) from the 5% general partnership stake in Logistics that was somehow given to you. Since you were paid extremely well by Delek, it seems impossible to understand why you also received an ultimate 5% general partner interest in Logistics—a subsidiary of Delek. Obviously, you wanted more than you were already being paid by the Company, but since part of your responsibilities to the Company was to manage Logistics as well, why should you have been paid additional sums for that? Moreover, not only did you receive yearly partnership distributions for your 5% stake, but when the Company and Logistics fixed some of the more egregious aspects of their relationship, you apparently ended up pocketing over $21 million for your stake.
As we noted in our March 1st and prior letters, while the stockholders of Delek have suffered through a series of poor management decisions, you personally have done extremely well. Particularly troublesome are decisions to drop down assets to Logistics at what seem to us to be very low valuations. Such drop downs are not in the interest of Delek’s stockholders. They were, however, in your personal economic interest because they swelled the coffers of Logistics’ general partner—of which you held 5%. And it appears that they also served to spike the value of that interest in the months before the Company repurchased it for over $21 million.
Delaware law allows stockholders to inspect the books and records of corporations so that they can better understand whether their company is being managed properly. We followed that law to ask Delek to produce a reasonable number of documents that would allow us to better understand why you were paid so much and why you received, and so greatly benefited from, the 5% interest.
Among other things, we thought these documents would allow us—and our fellow stockholders—to better assess whether Delek’s supposedly independent directors are doing their jobs well, or whether, as we believe is likely, you tend to steamroll over them, almost inevitably getting your way. If the latter is the case, then the Company clearly needs directors with far more backbone; directors who are willing to tell you “no” no matter how much pressure you apply to them.
We understand that you claim this is all nonsense—that you are actually underpaid; that the independent directors are fully willing to challenge your pay demands; that the Company is well managed and that its economic failings are the fault of market conditions or the mistakes of others or other problems totally unrelated to your actions.
But if that is the case, what do you have to hide? Why not simply produce the documents if they should back your position? Why hire legions of lawyers billing at close to $2,000 per hour to fight our request? Why not show us the documents—we agreed up front not to share any documents you think are confidential without permission from the Company or the approval by a court?
Yet, as of right now, the Company is refusing to produce even the most innocuous documents to us. For example, it will not even produce documents showing us the Company’s calculations of your total compensation over this period. That can’t be secret, can it? But for some reason you are saying “No.” That response, Mr. Yemin, causes us—and we suspect other stockholders—to ask, “what is he hiding?”
It also raises other questions. For example, have the “independent” directors on your board agreed to this? Have you even asked them? Do they know about the large legal bills that Delek is now incurring to keep from producing even one document? Do they really think that this information is too secret for stockholders to know? Or perhaps do all of you view it as being simply too embarrassing? Or is it perhaps the case that you are unilaterally making these decisions without seeking input?
We cannot know what the answers to these and similar questions are. All we can do is to note that none of the documents we’ve requested seems particularly confidential or is likely to hurt the Company if the information becomes public. Thus, we have to ask: Why the secrecy? Why all the expensive lawyers?
Calouste Gulbenkian, the original Mr. 5%, was able to refuse to answer questions about the sources of his income. If he found questions to be offensive, he could simply board his yacht and steam away to some friendlier jurisdiction. But Delek is a Delaware corporation; its stockholders have rights and even the most imperial chief executives are subject to having their stockholders recall them to their duty. You might believe that legions of lawyers will protect you but you should keep in mind, it’s not the lawyers—no matter how overpaid—who vote in corporate elections. It is the stockholders.
The immortal Joe Louis famously said about an opponent, “he can run but he can’t hide.” And Mr. Yemin, you can’t hide here. You are going to have to face your stockholders whether you like it or not.
In addition, while we have no desire to enrich your Praetorian Guard of white-shoe lawyers (especially given our 15% ownership of the Company’s stock which means that we will be effectively paying 15% of their bills), if you continue to refuse to discuss this matter with us reasonably we will have no choice but to pursue it in court.
So, we suggest that you pick up the phone, give us a call and rationally discuss our list of requested documents with us. We also continue to be willing to try to resolve the pending proxy contest in a reasonable way that is stockholder friendly if you want to talk about that.
It’s up to you, Mr. Yemin. The stockholders will be watching.
CVR ENERGY, INC.
/s/ David L. Lamp
David L. Lamp President and Chief Executive Officer
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