DEFA14A: Adams Resources & Energy Addresses Stockholder Lawsuits Amidst Merger with Tres Energy

Adams Resources & Energy is voluntarily supplementing its proxy statement related to its merger with Tres Energy in response to stockholder lawsuits challenging the adequacy of disclosures.

Summary

• Adams Resources & Energy is addressing lawsuits filed by purported stockholders challenging the disclosures related to the proposed merger with Tres Energy LLC.
• Two complaints have been filed in the Supreme Court of the State of New York, County of New York: Jones v. Adams Resources & Energy, Inc., et al., Index No. 650083/2025, filed on January 7, 2025, and Wright v. Adams Resources & Energy, Inc., et al., Index No. 650112/2025, filed on January 8, 2025.
• The lawsuits allege inadequate disclosures in the proxy statement and seek to enjoin the merger or, alternatively, damages and attorneys' fees.
• The company has also received demand letters from ten purported stockholders alleging similar insufficiencies in the disclosures in the Proxy Statement under Section 14(a) and Section 20(a) of the Exchange Act.
• To avoid potential delays and minimize distractions, Adams Resources & Energy is voluntarily supplementing the proxy statement without admitting any liability or wrongdoing.
• The supplemental disclosures will not affect the merger consideration or the timing of the special meeting of stockholders, scheduled for January 29, 2025, at 9:30 AM Central Time.
• The company believes the claims are without merit and that no supplemental disclosure is required under applicable law.
• The merger agreement, initially between Adams Resources & Energy, Tres Energy LLC, and ARE Acquisition Corporation, has seen Parent assign its rights and obligations to ARE Equity Corporation, an affiliate of Parent, although Parent remains obligated if ARE Equity Corporation does not fully perform.
• The initial offer from Tres Energy was $40 per share in cash, with no financing contingency and a request for a 45-day exclusivity period.
• GulfStar will be entitled to a success fee of one percent (1%) of the consideration to be paid by Parent in the Merger, or approximately $1.0 million.

Sentiment

Score: 4

Explanation: The sentiment is neutral to slightly negative due to the ongoing litigation and the need for supplemental disclosures, although the company maintains the claims are without merit. The merger is still expected to proceed, but the legal challenges introduce uncertainty.

Positives

• The company is proactively addressing stockholder concerns by supplementing the proxy statement.
• The merger consideration and the timing of the special meeting remain unaffected by the lawsuits.
• The company believes the claims asserted in the Litigation Matters are without merit and that no supplemental disclosure is required under applicable law.

Negatives

• The lawsuits and demand letters could potentially delay or adversely affect the consummation of the merger.
• The company is incurring costs to respond to the litigation matters.
• The lawsuits allege inadequate disclosures in the proxy statement.

Risks

• Failure to obtain the required vote of Adams' stockholders.
• The risk that a condition of closing of the proposed transaction may not be satisfied or that the closing of the proposed transaction might otherwise not occur.
• Disruption of management time from ongoing business operations due to the proposed transaction.
• Adverse effects on the market price of Adams' common stock due to announcements relating to the proposed transaction.
• Adverse effect on the ability of Adams to retain customers and retain and hire key personnel and maintain relationships with its suppliers and customers.
• Occurrence of any event, change or other circumstance or condition that could give rise to the termination of the Merger Agreement, including in circumstances requiring the Company to pay a termination fee.
• Unexpected costs, charges or expenses resulting from the Merger.
• Potential litigation relating to the Merger that could be instituted against the parties to the Merger Agreement or their respective directors, managers or officers, including the effects of any outcomes related thereto.
• Worldwide economic or political changes that affect the markets that the Company's businesses serve which could have an effect on demand for the Company's products and services and impact the Company's profitability.
• Disruptions in the global credit and financial markets, including diminished liquidity and credit availability, cyber-security vulnerabilities, crude oil pricing and supply issues, retention of key employees, increases in fuel prices, and outcomes of legal proceedings, claims and investigations.

Future Outlook

The company is focused on consummating the merger with Tres Energy, while addressing the legal challenges and ensuring compliance with disclosure requirements.

Management Comments

• The Company believes that the claims asserted in the Litigation Matters are without merit and that no supplemental disclosure is required under applicable law.
• Nothing in these supplemental disclosures shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein.
• To the contrary, the Company specifically denies all allegations in the Litigation Matters that any additional disclosure was or is required or material.

Industry Context

Mergers and acquisitions in the energy sector often attract scrutiny from stockholders, leading to litigation over disclosure adequacy. This case reflects a common scenario where companies must balance the desire to complete a transaction with the need to address legal challenges and ensure transparency.

Comparison to Industry Standards

• The document references several comparable companies and transactions used in the financial analysis by Houlihan Lokey.
• These include specialized carrier companies like Ardmore Shipping Corporation, Marten Transport, Ltd., and World Kinect Corporation, and dry van truckload companies like Covenant Logistics Group, Inc. and Schneider National, Inc.
• The selected transactions include Martin Midstream Partners L.P.'s acquisition by Martin Resource Management Corporation and Navig8 TopCo Holdings Inc.'s acquisition by ADNOC Logistics & Services plc.
• The enterprise value to LTM adjusted EBITDA multiples for these transactions range from 2.2x to 7.0x.

Legal Proceedings

• Two complaints have been filed in the Supreme Court of the State of New York, County of New York: Jones v. Adams Resources & Energy, Inc., et al., Index No. 650083/2025, filed on January 7, 2025, and Wright v. Adams Resources & Energy, Inc., et al., Index No. 650112/2025, filed on January 8, 2025.
• The Complaints assert claims under New York common law challenging the adequacy of the disclosures relating to the proposed Merger.
• The Complaints seek, among other things, to enjoin the Company from consummating the Merger or, in the alternative, damages and attorneys fees.
• The Company has received demand letters from ten purported Company stockholders alleging similar insufficiencies in the disclosures in the Proxy Statement under Section 14(a) and Section 20(a) of the Exchange Act.

Stakeholder Impact

• Shareholders are impacted by the potential delay or disruption of the merger and the associated legal costs.
• Employees may be affected by uncertainty regarding their future employment with the surviving corporation.
• Customers and suppliers may experience some disruption due to the ongoing merger process.

Next Steps

• The company will hold a special meeting of stockholders on January 29, 2025, to vote on the merger.
• The company will continue to respond to the litigation matters and provide supplemental disclosures as necessary.
• Parent intends to have discussions with certain executive officers of Adams regarding employment with the Surviving Corporation or one or more of its affiliates.

Key Dates

Keywords

merger, Adams Resources & Energy, Tres Energy, proxy statement, lawsuits, stockholders, disclosures, litigation