Martin Resource Management (MRMC) responded on July 11 to two New York capital groups seeking to buy spinoff Martin Midstream Partners (MMLP), but sidestepped concerns and criticisms raised over its own proposal for MMLP.

Nut Tree Capital Management LP, an investment management firm, and hedge fund Caspian Capital LP, presented MRMC with a non-binding offer in June to buy the midstream company for $4 per unit, or roughly $131 million cash. The offer is a 31% premium over MRMC’s May proposal to buy Martin Midstream for $3.05 per unit at an estimated total of $100.3 million. 

The firms, which both are investors in Martin Midstream’s debt, said MRMC’s initial offer was undervalued and the transaction process is being conducted by related parties. They made the offer public on July 11.

In response, Sharon L. Taylor, CFO for Kilgore, Texas-based Martin Midstream Partners, said MRMC is “interested only in acquiring all of the outstanding common units of MMLP and have no interest in selling our interests in MMLP or the general partner or in pursuing any other strategic alternative involving MMLP or the general partner,” Taylor said in a press release.

Taylor said MRMC remains in active discussions with the GP’s conflicts committee, created by its board of directors.

“If we are not able to reach a definitive agreement with respect to the potential transaction, we will announce the withdrawal of our proposal,” Taylor said.

Nut Tree and Caspian’s June offer was presented as a “confidential, non-binding proposal to purchase Martin Midstream Partners… in a form that would result in holders of the partnership’s common units receiving $4.00 per MMLP common unit in cash,” according to a letter sent to Martin Midstream’s general partner (GP).

In their July 11 letter, the firms said the offer was made public “so that all holders of the partnership’s common units can evaluate it.”

Stifel’s Selman Akyol, managing director, also noted that the GP’s conflicts committee “would have a difficult time getting an opinion letter saying the current MRMC offer was fair” in light of the capital firms’ higher valucation.

Nut Tree and Caspian also contend that Martin Midstream’s ownership structure with related businesses resulted in MRMC’s initial, “conflict-ridden” proposal in May.

Martin Resource spun off Martin Midstream through a 2002 IPO.

Martin Midstream’s general partner (GP) is wholly owned and controlled by MRMC and its subsidiaries, as well as Ruben Martin III, who serves as GP’s board chair as well as MRMC’s president, CEO and chairman.

MRMC and Ruben Martin own more than 25% of Martin Midstream’s common units, according to Stifel.

MRMC owns 100% of the equity interests in Martin Midstream’s GP and approximately 15.7% of the outstanding limited partnership units, Taylor said in the press release.

The entanglement of MRMC, Martin Midstream, its GP and Martin Ruben were part of the blistering July 11 letter from Nut Tree and Caspian.

The firms said they presented their “superior” offer in June and were informed the conflicts committee “would not engage with us unless the general partner were to support our proposal, a step that we view as highly irregular given the interconnected relationships between MRMC, the general partner and MMLP.”

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