Dealmaker: Jeffrey Kahn

The Deal: Kahn helped arrange a $230 million Employee Stock Ownership Plan (ESOP) for Martin Resource Management Corp. of Kilgore, Texas.
The ESOP was completed Oct. 2.

Details: Kahn, of Greenberg Traurig’s Boca Raton office, and Marc Baluda, of the firm’s San Francisco office, co-chair the firm’s ESOP group. They coordinated a Greenberg team that included attorneys in six offices across the U.S.

An ESOP is a form of qualified retirement plan, similar to a 401(k), except that it is invested in the employer’s stock, not in outside investments. Unlike 401(k) plans, employees do not have to contribute.

Martin Resource is a leading independent marketer, distributor and transporter of hydrocarbon products and by-products. It owns 12 companies, including Martin Midstream Partners LP.

“Employees already had stock in the company, but under this ESOP new stock was sold,” Kahn said.

The process began in 2010 when Martin Resource reached out to New York-based CSG Partners LLC, a boutique investment bank specializing in ESOPs, acquisitions and mergers.

Greenberg became involved in 2011 when Martin Resource decided to go forward with the ESOP. Martin Resources executives were familiar with the firm, which has offices in Austin, Houston and Dallas. The firm is headquartered about 120 miles east of Dallas.

The firm provided legal counsel in the areas of plan design, finance and banking arrangements, stock redemption, taxes, employee benefits and other matters.

The structure of the transaction involved a sale of two assets controlled by Martin Resource to Martin Midstream. Martin Midstream paid $122 million to acquire a business unit, a specialty lubricant product packaging operation, from Cross Oil Refining & Marketing Inc. It also took a $150 million equity interest in Redbird Gas Storage LLC. Cross Oil and Redbird are subsidiaries of Martin Resource.

The transaction took just over 18 months to complete.

“We spent a significant amount of time doing due diligence and a significant amount of time determining how to finance the transaction,” Kahn said.

“We looked at a variety of finance structures for the deal. We looked at whether to use just pure debt. Ultimately, we felt we could raise enough money through an asset sale through the publicly traded subsidiary.”

Martin Resource said the ESOP is one of the largest ever established in the oil and gas industry. More than 1,500 employees are covered by the ESOP, which will diversify investments into all 12 of the Martin companies.

Martin Resource wanted the employees to have a significant, but minority, position. The $230 million was consistent with what they could raise in terms of financing, Kahn said.

“By recognizing the potentially enhanced productivity resulting from employee investment in the business, as well as the tax efficient benefits offered by Congress for broad-based employee ownership, the company has embraced the value proposition of ESOPs,” Kahn said.

Background: Kahn is a Greenberg shareholder who specializes in employee benefits, executive compensation, and the design and implementation of ESOPs.

Kahn and Baluda, a San Francisco shareholder, were assisted by Boca Raton shareholders Rebecca DiStefano and Brandon Feingold, and Fort Lauderdale shareholder Harry Friedman.

In the Austin office, shareholder Ronald Skloss and associate Katy Livingston, as well as shareholder Frank Bradley in Houston, were responsible for making sure the transaction complied with Texas law.