Hedge funds Nut Tree Capital Management and Caspian Capital have made a joint offer to acquire Martin Midstream Partners, in a bid to thwart a proposed buyout of the fuel storage and transport company by its largest shareholder, according to a report by Reuters.
The hedge funds have offered unitholders $4 per unit in cash, valuing the publicly-traded units of the Texas-based company at $156m. This price represents a 21% premium over the unit’s closing price on Wednesday and surpasses the $3.05 per unit cash bid made by Martin Resource Management Corporation on 24 May to acquire all common units it did not already own.
Following the announcement, Martin Midstream’s common units surged, closing 13% higher at $3.73 per unit.
In a letter to the board committee evaluating MRMC’s offer, Nut Tree and Caspian Capital criticised the committee for not engaging with them despite their financially superior bid. They argued that MRMC’s offer was undervaluing the company and highlighted potential conflicts of interest.
“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 hedge funds wrote in their letter.
Martin Midstream, structured as a tax-efficient master limited partnership, has its ownership split between publicly-traded common units and general partner units, with the latter wielding significant control over the MLP’s governance. MRMC controls the GP stake and owns 15.7% of the common units.
In response to the hedge funds’ offer, Martin Midstream stated it could not comment as MRMC remained in active discussions with the board committee about its initial proposal. MRMC reiterated its interest in buying out the company and stated it would not sell its position to another party.
