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Martin Midstream (MMLP) Units Gain Amid Buyout Proposals
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Martin Midstream Partners (MMLP - Free Report) has received a non-binding offer from two New York-based capital groups, Nut Tree Capital Management LP and Caspian Capital LP, to acquire it at $4 per unit. The offer had been rejected by MMLP’s general partner's Conflicts Committee despite overshadowing the previous bid for takeover made by Martin Resource Management Corporation (“MRMC”) in May 2024. MRMC made an offer to acquire the midstream firm at $3.05 per unit, totaling approximately $100.3 million.
Nut Tree and Caspian Capital’s offer to buy out MMLP at $4 per unit, totaling approximately $131 million in cash, represents a 31% premium to MRMC’s previous offer. Martin Midstream’s management refused to comment on the offer made by the capital groups. However, it stated that the midstream firm is currently engaged in talks with the Conflicts Committee of MMLP regarding the buyout offer made by MRMC. MRMC and its subsidiaries are owned and managed by Martin Midstream’s general partner.
In a letter (dated Jul 11, 2024) to MMLP’s general partner, the two capital groups highlighted that their proposal was not contingent upon financing conditions and would be funded entirely via capital on hand. Furthermore, both companies were existing investors in Martin Midstream's debt and had sufficient knowledge of the midstream company’s operations and financial structure.
The letter also raised concerns regarding a potential conflict of interest between the midstream firm and its general partner. The two capital groups believe that MRMC’s offer at $3.05 per unit severely undervalues MMLP common units. Per Nut Tree and Caspian’s statement, the all-cash offer put forward by them would be accretive and provide immediate value to MMLP’s unitholders. It is also the best alternative to the clearly conflicted offer made by MRMC.
Despite these factors being true, the Martin Midstream general partner’s Conflict Committee had turned down its proposal and refused to engage with the two groups on multiple occasions. The committee stated that it would need the approval of the general partner to support the proposal, which is viewed as an irregular move due to the interconnected relationships between MRMC, the general partner, and MMLP. The letter also raised questions regarding the autonomy of the Conflict Committee due to this move.
Nut Tree and Caspian Capital’s bid appears to be the most compelling option at present. However, speculations say that MRMC would raise the target price per unit in a counteroffer, making it a more lucrative bid.
Martin Midstream’s ownership is split between the common units and the general partner units, the latter having a greater influence. The general partner units are under the control of MRMC, which also holds 15.7% of the common units. Previously, MRMC had clearly mentioned that it is only interested in acquiring the midstream firm and will not engage in selling its stake to any other party.
MMLP common units have gained almost 10% since Nut Tree and Caspian Capital announced their bid publicly on Jul 11, 2024.
SM Energy is an upstream energy firm operating in the prolific Midland Basin and the South Texas regions. For 2024, the company expects its production to increase from the prior-year reported figure, signaling a bright production outlook.
Hess Midstream owns, operates, develops and acquires a wide range of midstream assets, providing services to Hess Corporation and other third-party customers. The partnership has a stable fee-based revenue model secured via long-term commercial contracts. Since Hess Midstream operates through 100% fee-based contracts, it is exposed to minimal commodity price risks.
Chevron is one of the largest publicly traded oil and gas companies in the world, with its operations spread around the globe. It is currently in the process of acquiring Hess Corporation. The acquisition is seen as a major win for Chevron, as it will give the company access to Hess' high-quality assets in Guyana and the Bakken Formation.
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Martin Midstream (MMLP) Units Gain Amid Buyout Proposals
Martin Midstream Partners (MMLP - Free Report) has received a non-binding offer from two New York-based capital groups, Nut Tree Capital Management LP and Caspian Capital LP, to acquire it at $4 per unit. The offer had been rejected by MMLP’s general partner's Conflicts Committee despite overshadowing the previous bid for takeover made by Martin Resource Management Corporation (“MRMC”) in May 2024. MRMC made an offer to acquire the midstream firm at $3.05 per unit, totaling approximately $100.3 million.
Nut Tree and Caspian Capital’s offer to buy out MMLP at $4 per unit, totaling approximately $131 million in cash, represents a 31% premium to MRMC’s previous offer. Martin Midstream’s management refused to comment on the offer made by the capital groups. However, it stated that the midstream firm is currently engaged in talks with the Conflicts Committee of MMLP regarding the buyout offer made by MRMC. MRMC and its subsidiaries are owned and managed by Martin Midstream’s general partner.
In a letter (dated Jul 11, 2024) to MMLP’s general partner, the two capital groups highlighted that their proposal was not contingent upon financing conditions and would be funded entirely via capital on hand. Furthermore, both companies were existing investors in Martin Midstream's debt and had sufficient knowledge of the midstream company’s operations and financial structure.
The letter also raised concerns regarding a potential conflict of interest between the midstream firm and its general partner. The two capital groups believe that MRMC’s offer at $3.05 per unit severely undervalues MMLP common units. Per Nut Tree and Caspian’s statement, the all-cash offer put forward by them would be accretive and provide immediate value to MMLP’s unitholders. It is also the best alternative to the clearly conflicted offer made by MRMC.
Despite these factors being true, the Martin Midstream general partner’s Conflict Committee had turned down its proposal and refused to engage with the two groups on multiple occasions. The committee stated that it would need the approval of the general partner to support the proposal, which is viewed as an irregular move due to the interconnected relationships between MRMC, the general partner, and MMLP. The letter also raised questions regarding the autonomy of the Conflict Committee due to this move.
Nut Tree and Caspian Capital’s bid appears to be the most compelling option at present. However, speculations say that MRMC would raise the target price per unit in a counteroffer, making it a more lucrative bid.
Martin Midstream’s ownership is split between the common units and the general partner units, the latter having a greater influence. The general partner units are under the control of MRMC, which also holds 15.7% of the common units. Previously, MRMC had clearly mentioned that it is only interested in acquiring the midstream firm and will not engage in selling its stake to any other party.
MMLP common units have gained almost 10% since Nut Tree and Caspian Capital announced their bid publicly on Jul 11, 2024.
Zacks Rank and Key Picks
Currently, MMLP carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the energy sector are SM Energy (SM - Free Report) , Hess Midstream Partners LP (HESM - Free Report) and Chevron Corporation (CVX - Free Report) . SM Energy presently sports a Zacks Rank #1 (Strong Buy), while Hess Midstream and Chevron carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
SM Energy is an upstream energy firm operating in the prolific Midland Basin and the South Texas regions. For 2024, the company expects its production to increase from the prior-year reported figure, signaling a bright production outlook.
Hess Midstream owns, operates, develops and acquires a wide range of midstream assets, providing services to Hess Corporation and other third-party customers. The partnership has a stable fee-based revenue model secured via long-term commercial contracts. Since Hess Midstream operates through 100% fee-based contracts, it is exposed to minimal commodity price risks.
Chevron is one of the largest publicly traded oil and gas companies in the world, with its operations spread around the globe. It is currently in the process of acquiring Hess Corporation. The acquisition is seen as a major win for Chevron, as it will give the company access to Hess' high-quality assets in Guyana and the Bakken Formation.