Nut Tree and Caspian Offer Represents a 31% Premium – and a Highly Compelling Alternative – to Martin Resource Management Corporation’s Below Market and Conflict-Ridden Proposal
Nut Tree and Caspian Are Making Offer Public After Conflicts Committee of the Board of Martin Midstream’s General Partner Has Refused to Engage
Nut Tree and Caspian Have Advisors in Place and Are Prepared to Commence Expedited Due Diligence; Offer is Not Subject to a Financing Condition
Nut Tree and Caspian Will Consider all Available Alternatives if Conflicts Committee Refuses to Meaningfully Engage
NEW YORK, July 11, 2024 /PRNewswire/ — Nut Tree Capital Management LP (“Nut Tree”) and Caspian Capital LP (“Caspian“), today announced they sent a letter to the Conflicts Committee of the Board of Directors (the “Committee”) of Martin Midstream GP LLC (the “General Partner”) in which Nut Tree and Caspian reiterated their non-binding proposal made on June 21, 2024 to acquire Martin Midstream Partners L.P. (NASDAQ: MMLP) (“MMLP”) for $4.00 per MMLP common unit in cash (the “Proposal”).
The Proposal represents a 31% premium over the $3.05 per common unit offer made by Martin Resource Management Corporation (“MRMC”) on May 24, 2024, and 23% over the closing price of the common units on July 9, 2024.
The Proposal is not subject to any financing condition and would be financed through capital on hand. As existing investors in the MMLP’s debt, and given their significant experience investing in the oil and gas sectors, Nut Tree and Caspian are already very familiar with MMLP, its operations and capital structure, and have reviewed all publicly available information regarding MMLP.
Jed Nussbaum, Chief Investment Officer of Nut Tree, and David Corleto, Partner at Caspian, said, “We believe our premium, all cash proposal would bring compelling and immediate value to unitholders of MMLP significantly in excess of MRMC’s concerning and clearly conflicted offer. Notwithstanding our multiple attempts, the Conflicts Committee has thus far refused to meet with us regarding the merits of our proposal except to inform us that it 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.”
For context, the General Partner is wholly owned and controlled by MRMC and its subsidiaries, and Ruben Martin, III serves as Chairman of the Board of Directors of the General Partner and the President, Chief Executive Officer, and Chairman of the Board of Directors of MRMC.
Messrs. Nussbaum and Corleto continued, “We have significant concerns about MRMC’s offer, which we believe would deprive unaffiliated common unitholders of fair value for their investments ahead of a series of value-creating catalysts at MMLP. Considering the substantial premium our offer provides, we believe it is incumbent on the Committee to act for the benefit of all MMLP unitholders and engage in serious discussions with us and the General Partner regarding our offer and valuation of MMLP’s common units. It is our strong preference to work with the Committee, MMLP, and their advisors, to reach a mutually beneficial agreement, and we stand ready to commence confirmatory due diligence immediately and on an expedited basis. Depending on the outcome of that diligence, we may also be able to increase our proposed purchase price of $4.00 per MMLP common unit, providing even greater value to unitholders.”
The full text of Nut Tree and Caspian’s letter to the members of Martin Midstream GP LLC Conflicts Committee is below:
July 11, 2024
Martin Midstream GP LLC
4200 Stone Road
Kilgore, Texas 75662
Attention: Byron Kelley, Chair of Conflicts Committee
Dear Members of the Conflicts Committee:
On June 21, 2024, Nut Tree Capital Management LP (“Nut Tree“) and Caspian Capital LP (“Caspian“), together and on behalf of certain funds and co-investors each advises or manages, submitted to the Conflicts Committee of the Board of Directors (the “Committee“) of Martin Midstream GP LLC (the “General Partner“) a confidential, non-binding proposal to purchase Martin Midstream Partners L.P. (“MMLP” or the “Partnership“) in a form that would result in holders of the Partnership’s common units receiving $4.00 per MMLP common unit in cash. Our proposal offers a significant 31% premium over the $3.05 per common unit offer made by Martin Resource Management Corporation (“MRMC“) in its letter dated May 24, 2024, and 23% over the closing price of the common units on July 9, 2024.
As we noted in our June 21 letter, we have the committed and available capital to support this proposal and can confirm that the definitive transaction agreements would not include a financing condition. Further, both Nut Tree and Caspian have significant experience investing in the oil & gas sectors.
Unfortunately, despite our attempts to engage privately and constructively with the Committee regarding a mutually agreeable transaction that is beneficial to all MMLP common unitholders, the Committee has refused to even meet with us. Through its advisors, the Committee informed us on July 1, 2024, that it would not engage in any way 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. Of course, because the General Partner is wholly owned and controlled by MRMC and its subsidiaries, and Ruben Martin, III serves as Chairman of the Board of Directors of the General Partner and the President, Chief Executive Officer, and Chairman of the Board of Directors of MRMC, the General Partner is deeply conflicted with respect to MRMC’s offer. 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 from the General Partner and ability to comply with its duties under MMLP’s Partnership Agreement. Still, we contacted Mr. Martin with the goal of opening a dialogue with the General Partner regarding a sale of MMLP, and not surprisingly, we were summarily dismissed.
We have significant concerns that MMLP will be sold to MRMC in a related-party transaction that materially undervalues the Partnership and its future prospects, which stands to benefit the General Partner and Mr. Martin at the expense of the unaffiliated common unitholders. The fact that the Committee has refused to even meet with us to discuss our higher valuation of MMLP’s common units raises serious concerns regarding the Committee’s willingness to run a fair process and fully evaluate what we believe to be a superior and more compelling offer as compared to the proposed transaction with MRMC or potential alternatives.
Our financial analysis and review of publicly available information confirm our view that the MRMC offer price of $3.05 per unit significantly undervalues MMLP common units and is highly inadequate. The MRMC offer represents an Enterprise Value of 4.8x management’s expected 2024 EBITDA, compared to comparable master limited partnerships that trade at approximately 8.5x as described in MMLP’s own presentation slide entitled “Valuation Upside”.1 In discussions we have had with members of management in connection with our investments in MMLP, we have been told repeatedly that management believes the common units are undervalued and should trade more in line with EBITDA valuation multiples of similar companies. Additionally, the timing of the insider offer comes ahead of what we believe will be positive turning points for the Partnership, and fails to ascribe appropriate value in MMLP’s long-term upside, including available strategic opportunities with its joint venture DSM Semichem LLC, an upcoming ability to make distributions to common unitholders under financing agreements, MMLP’s projection of $29 million, or $0.74/unit, of distributable cash flow in 2024,2 and attractive debt refinancing opportunities.
As a result of our efforts to deliver superior value to the MMLP common unitholders having been thwarted, we are making our proposal public so that all holders of the Partnership’s common units can evaluate it. As we previously communicated, we are confident that our proposal is significantly superior to MRMC’s proposal, and that the Partnership’s unitholders who are unaffiliated with MRMC will find our proposal more compelling, while providing equal or greater transaction certainty.
As we communicated in our June 21 letter, we stand ready to enter into an appropriate confidentiality agreement and commence our due diligence immediately and on an expedited basis. As existing investors in the Partnership’s debt, and given our significant experience in this sector, we are already very familiar with the Partnership, its operations and capital structure, and have reviewed all publicly available information regarding the Partnership.
Depending on the outcome of that diligence, we may also be able to increase our proposed purchase price of $4.00 per MMLP common unit, providing even greater value to the Partnership’s unitholders.
We are prepared to dedicate substantial resources towards the execution of definitive transaction agreements and the consummation of the proposed transaction. To that end, we have already engaged legal counsel, Latham & Watkins LLP and Olshan Frome Wolosky LLP, to assist in the process.
We stand ready to meet with the Committee and its advisors to share our views on valuation. However, should the Committee refuse to do so, we reserve all rights and will consider all available alternatives to pursue our proposal.
Sincerely,
|
Nut Tree Capital Management, LP |
Caspian Capital LP |
|
Jed Nussbaum |
David Corleto |
|
Scott Silver |
Meagan Bennett |
Latham & Watkins LLP and Olshan Frome Wolosky LLP are serving as legal counsel to Nut Tree and Caspian.
About Caspian Capital LP
Caspian Capital LP, founded in 1997, is focused on performing, stressed, distressed corporate credit, and value equities. Caspian currently oversees $4 billion in assets under management.
About Nut Tree Capital Management LP
Nut Tree Capital, founded in 2015, implements a fundamentals-based strategy focused on distressed credit, stressed/event-driven credit and value equities. Nut Tree currently oversees $4 billion in assets.
1 See Slide 12 in the Partnership’s May 2024 investor presentation.
2 See Slide 23 in the Partnership’s May 2024 investor presentation.
Media Contacts:
Jonathan Gasthalter/Nathaniel Garnick
Gasthalter & Co.
(212) 257-4170
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SOURCE Nut Tree Capital Management and Caspian Capital
