Hedge Funds Launch Rival Bid for Martin Midstream Amid Takeover Battle
(Reuters) — Hedge funds Nut Tree Capital Management and Caspian Capital are making an offer for Martin Midstream Partners, a letter seen by Reuters showed, aiming to scupper a bid from the fuels storage and transporter's largest shareholder to buy it out.
The rival offer would give unitholders of Martin Midstream $4 per unit in cash, valuing the Kilgore, Texas-based company's publicly traded units at $156 million. The price is a 21% premium to the unit's $3.30 closing price on Wednesday.
The bid tops the $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.
In the letter to the board committee set up to evaluate MRMC's offer, the hedge funds said their efforts to engage on their bid had so far been rebuffed, despite it being more financially attractive. It said that 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.
Martin Midstream and MRMC did not immediately respond to requests for comment.
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.
In a filing detailing its offer, MRMC said it only had interest in buying out the company, and would not consider selling it to another party.
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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