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Martin Midstream Partners has said it is standing by its planned acquisition by its largest shareholder, Martin Resource Management Corp (MRMC), despite opposition from hedge funds Nut Tree Capital Management and Caspian Capital.

The funds have launched a campaign to rally shareholders against the $157m deal, which fuel transport and storage specialist Martin Midstream agreed to earlier this month. The deal will see MRMC pay $4.02 per unit in cash for the common units it does not already own, following an initial offer in May of $3.05 per unit. MRMC currently holds a 15.7% stake in Martin Midstream’s common units.

However, Nut Tree Capital Management and Caspian Capital, who made a competing bid in July to buy Martin Midstream for $4.50 per unit, continue to oppose the MRMC deal. The hedge funds argue that the offer undervalues the company and have raised concerns over potential conflicts of interest in the process that led to the MRMC bid being accepted.

In response, Martin Midstream issued a statement reaffirming its support for the MRMC takeover. The company stated that the deal was approved after a nine-month evaluation process, during which the hedge funds’ offer was considered.

Nut Tree Capital and Caspian Capital hold exposure to Martin Midstream through cash-settled derivatives equivalent to 13.2% of the common units. The funds plan to file regulatory paperwork that would allow them to petition unitholders to vote against the buyout.

Despite this, the hedge funds face significant hurdles in blocking the deal. Unitholders aligned with MRMC, representing 26% of the common units, have already committed to voting in favour of the transaction, although the deal requires approval from the majority of the outstanding common units for it to proceed.

Martin Midstream, based in Kilgore, Texas, also questioned the hedge funds’ alignment with shareholders, noting that their current stake in the company is through derivatives rather than direct ownership of common units.

MRMC’s final offer represents a 34% premium to Martin Midstream’s closing share price on May 23, the day before the bid was publicly disclosed.

The voting date for the buyout has not yet been announced.

This HedgeWeek rapid read report, published in partnership with MSCI, explores how existing equity and fixed income tools can be leveraged to more swiftly address client demand for systematic strategies.

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Key takeaways:

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Why Some Investors Build a Core Asset Instead of Buying One

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1.    Introduction        

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By Claire Sawyer, Associate Director of Content Development, CAIA Association


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