Submitted: January 12, 2015
Peter B. Andrews, Esquire Craig J. Springer, Esquire Andrews & Springer LLC
Rolin P. Bissell, Esquire Tammy L. Mercer, Esquire Young Conaway Stargatt & Taylor LLP
David E. Ross, Esquire S. Michael Sirkin, Esquire Seitz Ross Aronstam & Moritz LLP
Thomas W. Briggs, Jr., Esquire Matthew R. Clark, Esquire Morris, Nichols, Arsht & Tunnell LLP
Plaintiffs Matthew Ellis and Chaile Steinberg are limited partner unitholders of Oiltanking Partners, L.P. ("Oiltanking") and bring this action to challenge the merger of Oiltanking with Defendant Enterprise Products Partners L.P. ("Enterprise") which now owns approximately two-thirds of Oiltanking's limited partner interests. They have moved to expedite this proceeding in order to seek a preliminary injunction halting the upcoming vote on the proposed acquisition.
Motions to expedite are granted if a plaintiff sets forth a sufficiently colorable claim and a sufficient possibility of irreparable injury. These showings are assessed in the context of the burdens on the parties and the Court of expedited proceedings.
Defendant Marquard & Bahls AG ("M&B") owned all of Oiltanking's general partner, Defendant OTLP GP, LLC ("GP"), and approximately sixty-five percent of the limited partner interests in Oiltanking. In June 2014, Enterprise approached M&B not only about buying M&B's interest in Oiltanking, but also its desire to acquire all of Oiltanking. M&B was willing to discuss the acquisition of its interest by Enterprise, but it did not support any deal structure that would depend upon the support of the unaffiliated unitholders.
The rights of the common unitholders of Oiltanking ("Common Unitholders"), such as the Plaintiffs, are defined in the First Amended and Restated Agreement of Limited Partnership of Oiltanking, dated as of July 19, 2011 (the "LP Agreement"). Under Section 14.3(b) of the LP Agreement, any merger would require approval of a Unit Majority. Section 1.1 of the LP Agreement defines Unit Majority as "(i) during the Subordination Period, at least a majority of the Outstanding Common Units (excluding Common Units owned by the General Partner and its Affiliates), voting as a class, and at least a majority of the Outstanding Subordinated Units, voting as a class, and (ii) after the end of the Subordination Period, at least a majority of the Outstanding Common Units."
The Subordination Period was expected to continue until mid-November 2014. Its purpose, as inferred from the LP Agreement, was to assure that the Common Unitholders received certain cash distributions from Oiltanking ahead of other investors in Oiltanking. Requiring a class vote of the Common Unitholders was a way to protect their cash flow expectations.
M&B was not interested in a transaction that would be dependent upon a class vote, essentially a majority-of-the-minority vote, of the unaffiliated Common Unitholders, who own approximately one-third of the limited partner interests. It advised Enterprise that it would deal directly with Enterprise, but that Enterprise should wait until the expiration of the Subordination Period to acquire the publicly held Common Units if it wanted to avoid a class vote on a merger.
M&B and Enterprise were able to negotiate an agreement under which Enterprise would acquire GP and M&B's two-thirds limited partner interests in Oiltanking. That transaction closed on October 1, 2014; a few days earlier, Enterprise had notified Oiltanking of its intention to acquire all of Oiltanking by merger. Its proposed merger price for each limited partner unit (a Common Unit) was less than what it was paying to M&B for its comparable units. GP referred the matter to the Conflicts Committee established under the LP Agreement, and the Conflicts Committee was able to negotiate an increase in ...