Hedge funds Nut Tree Capital Management and Caspian Capital said on Thursday 11 July, 2024, they have made an offer for Martin Midstream Partners, aiming to scuttle a bid from the fuels storage and transporter’s largest shareholder to buy it out, says Reuters.
The rival offer would give unitholders of Martin Midstream US$4 per unit in cash, valuing the Kilgore, Texas-based company’s publicly-traded units at US$156 million. The price is a 21% premium to the unit’s closing price on Wednesday.
The bid tops the US$3.05 per unit cash offer which Martin Resource Management Corporation (MRMC) said on May 24 it had made to acquire all common units it did not already own. MRMC is headed by Ruben S. Martin III, whose father in 1951 set up the business to which MRMC and Martin Midstream trace their roots.
Martin Midstream’s common units jumped on the news, closing 13% higher at $3.73 per unit.
In a letter to the board committee set up to evaluate MRMC’s offer, the hedge funds said efforts to engage with Martin Midstream on their bid had been rebuffed, despite it being more financially attractive. It said MRMC faced conflicts of interest and was trying to acquire Martin Midstream at below market value.
“We believe the committee’s insistence on the general partner’s support to engage in discussions regarding a premium acquisition offer is inappropriate and calls into question the committee’s own independence,” the letter said.
In a statement, Martin Midstream said it could not comment on the Nut Tree and Caspian offer as MRMC remained in active discussions with Martin Midstream’s board committee about MRMC’s earlier proposal.
Martin Midstream is structured as a tax-efficient master limited partnership (MLP), meaning ownership is split into publicly-traded common units, but also general partner (GP) units which have outsized influence because the owner of these controls the governance of the MLP.
The GP stake is controlled by MRMC, which also owns 15.7% of the common units.
MRMC remains only interested in buying out the company and will not sell its position to another party, MRMC said in a statement.
Dealmaking involving pipeline and storage companies has steadily grown, as buyers want to secure assets located in strategically-important locations, at a time when developing new energy infrastructure has proven challenging in many places.
Martin Midstream offers storage and transportation services for fuels and petrochemicals. It also manufactures fertilizers and lubricants, with its operations concentrated along the U.S. Gulf coast.
Both Nut Tree Capital and Caspian Capital are New York-based funds which focus on distressed middle-market companies.
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