UPDATE 3-Icahn urges CVR Energy to sell itself

* Icahn says share price does not reflect high refining margins

* Says CVR CEO to discuss suggestions with board

* Shares rise 2 pct

By Swetha Gopinath and Vaishnavi Bala

Feb 14 (Reuters) - Billionaire investor Carl Icahn urged crude oil refiner and fertilizer maker CVR Energy to put itself on the block, saying the company's stock price did not reflect its high profit margins.

Icahn, CVR's biggest shareholder with a 14.54 percent stake, said in a regulatory filing there were three or four possible buyers who could benefit from a deal with CVR Energy.

"Shareholders would be better served if (CVR Energy) commenced a process to put itself up for sale, rather than pursue the limited initiatives announced by the (company)," said Icahn, who had picked up the stake in CVR barely a month ago.

On Monday, CVR said it would start paying a quarterly dividend and sell a portion of its investment in majority-owed unit CVR Partners to fund a special dividend payment.

At the heart of Icahn's argument is what the industry refers to as crack spread -- the difference between the cost of crude oil and the price refiners charge for motor fuel.

"(CVR) is a small company with only two refineries. As a result, shareholders face an unfavorable risk reward ratio since they bear not only the risk of a decline in crack spreads, but also the risk of production interruptions which would reduce the upside from high crack spreads," Icahn said in the filing.

The company's refining margin per barrel of crude oil throughput nearly tripled to $25.03 per barrel for the three months ended September 30, 2011. This is much higher than larger peer Tesoro's refining margin of $16.53 per barrel for the same period.

CVR Energy, with a market value of $2.2 billion, has been among U.S. Midwest refiners to rake massive profits out of the record spread between London-based Brent and U.S. benchmark West Texas Intermediate (WTI) over the last year created by a supply glut at the Cushing, Oklahoma delivery hub.

INVESTORS NOT GAME?

Shares of the company were up 2 percent at $27.53 in afternoon trading on the New York Stock Exchange. They have gained 68 percent since November, when they touched a year-low.

"Icahn's trying to shake it up, see what he can do. If he doesn't get it done, he will bail out," said an investor who did not want to be named. The investor, who is one of the top shareholders of the company, said he was not looking to sell his stake.

"I don't think it's necessary to sell the company. I actually think the plan they have started on is a good one. They just need to increase the dividend, that would be a positive."

Another unnamed investor said he would tender shares only if the company got a good offer.

Icahn has had some high-profile disappointments last year in fights at Lions Gate Entertainment Corp, Clorox Co and Forest Laboratories Inc. Last month, he dropped his hostile bid for Commercial Metals Co .

Steve Eames, a spokesman for CVR Energy said, "We are aware of Mr Icahn's suggestion that we run a process to sell the company. The board and management remain focused on delivering further value to our shareholders in the future."