DEFM14A: Martin Midstream Partners L.P. to Go Private in $4.02 Per Unit Merger

Martin Midstream Partners L.P. is set to be acquired by Martin Resource Management Corporation in a going-private transaction, with public unitholders receiving $4.02 per unit in cash.

Summary

• Martin Midstream Partners L.P. (MMLP) has agreed to be acquired by Martin Resource Management Corporation (MRMC) in a merger transaction.
• Public unitholders of MMLP will receive $4.02 in cash per unit.
• The merger is a going-private transaction, meaning MMLP will become a wholly-owned subsidiary of MRMC and will no longer be publicly traded.
• A special meeting of MMLP unitholders is scheduled for December 30, 2024, to vote on the merger agreement.
• The merger agreement requires approval by a majority of the outstanding common units.
• Certain major unitholders, including MRMC and its affiliates, have agreed to vote in favor of the merger.
• The Conflicts Committee of the GP Board has unanimously determined the merger is fair and reasonable to the Partnership Unaffiliated Unitholders.
• The GP Board has also unanimously approved the merger agreement and recommends unitholder approval.
• The transaction is expected to close by the end of 2024, subject to unitholder approval and other closing conditions.

Sentiment

Score: 7

Explanation: The document presents a clear and detailed plan for a going-private transaction, with a premium offered to public unitholders. While there are risks and potential downsides, the overall tone is positive and focused on the completion of the merger.

Positives

• Public unitholders will receive a cash payment of $4.02 per unit, providing immediate liquidity.
• The merger consideration represents a premium to the recent trading price of the common units.
• The Conflicts Committee and the GP Board have both unanimously approved the merger, indicating a thorough review process.
• The transaction is expected to close by the end of 2024, providing a relatively quick resolution for unitholders.

Negatives

• Public unitholders will no longer have an equity stake in the Partnership after the merger.
• The merger is a taxable event for unitholders, potentially resulting in capital gains taxes.
• The Partnership will no longer be publicly traded, limiting future investment opportunities.
• The merger is subject to certain closing conditions, which could delay or prevent the transaction from completing.

Risks

• The merger is subject to unitholder approval, and there is a risk that the required vote may not be obtained.
• The merger is subject to regulatory approvals, and there is a risk that these approvals may not be obtained or may be delayed.
• There is a risk that the debt financing required to fund the merger may not be obtained.
• There is a risk that the merger may not be completed in a timely manner, or at all.
• There is a risk of litigation related to the merger, which could result in significant costs and delays.

Future Outlook

The merger is expected to close by the end of 2024, subject to unitholder approval and other closing conditions. The Partnership will become a wholly-owned subsidiary of Parent.

Management Comments

• The GP Board believes that the Merger is fair and reasonable to the Partnership and the Partnership Unaffiliated Unitholders.
• The GP Board recommends that Unitholders vote FOR the Merger Proposal and FOR the Adjournment Proposal.

Industry Context

The document notes the external environment for master limited partnerships (MLPs) generally, and for the Partnership specifically, including the reduced accessibility of debt and equity capital markets for MLPs, the increasing cost of capital for MLPs, and the increased desire of investors for companies legally structured as traditional corporations. These factors have led to numerous transactions involving MLPs, including buy-ins of MLPs by their corporate sponsors, acquisitions of MLPs by third parties, conversions of MLPs to corporations and simplifications of MLPs.

Comparison to Industry Standards

• The Merger Consideration represents a 34% premium to the closing price of the Common Units on May 23, 2024, and an 11.33% premium to the trailing 30-trading day volume-weighted average price of the Common Units on October 3, 2024.
• Houlihan Lokey's financial analysis included a selected companies analysis, comparing MMLP to other public companies in the midstream and energy sectors, such as Adams Resources & Energy, Inc., Genesis Energy, L.P., and NGL Energy Partners LP.
• Houlihan Lokey also performed a discounted cash flow analysis, which indicated an implied per unit value reference range of $2.33 to $5.22 per Common Unit (excluding corporate taxes) and $1.56 to $4.49 per Common Unit (including corporate taxes).
• Wells Fargo's financial analysis included a selected premiums paid analysis, which indicated a range of implied per unit prices for the Partnership of $3.14 to $3.79 based on observed premiums in selected transactions.
• Wells Fargo also performed a discounted cash flow analysis, which indicated an implied value range per Common Unit of $3.81 to $7.32.

Related Party Transactions

• The Partnership has various ongoing agreements with Parent and its subsidiaries, including an omnibus agreement, a master transportation services agreement, a diesel fuel terminal services agreement, miscellaneous terminal services agreements, a marine transportation agreement, a marine fuel agreement, a cross tolling agreement, a storage and services agreement, and leases with East Texas Mack Sales.
• Certain directors and officers of the General Partner and Parent maintain margin accounts with broker-dealers with respect to the Common Units held by such persons.

Stakeholder Impact

• Public unitholders will receive a cash payment for their units, but will no longer have an equity stake in the Partnership.
• Employees of the Partnership will continue to be employed by the surviving entity.
• Customers and suppliers of the Partnership will continue to do business with the surviving entity.
• Creditors of the Partnership will be subject to the terms of the debt agreements of the surviving entity.

Next Steps

• Unitholders will vote on the merger agreement at a special meeting on December 30, 2024.
• The Partnership and Parent will seek regulatory approvals for the merger.
• The parties will work to satisfy all closing conditions to complete the merger by the end of 2024.

Key Dates

Keywords

merger, acquisition, going-private, MLP, master limited partnership, common units, cash, Martin Midstream Partners, Martin Resource Management, MMLP