What happened

Units of American Midstream Partners (NYSE:AMID) had vaulted 28% by 10:45 a.m. EDT on Monday after the master limited partnership (MLP) agreed to a buyout transaction with a private equity fund.

So what

Energy-focused private equity company ArcLight Energy Partners has agreed to acquire all the units of American Midstream that it doesn't already own for $5.25 per unit in cash, which is a more than 30% premium to where it closed last week. The companies expect the deal to close during the second quarter.

Two people shaking hands near an energy facility.

Image source: Getty Images.

ArcLight has been working on taking the troubled American Midstream private since last fall. It initially offered $6.10 per unit in September following the company's failed merger with Southcross Energy Partners. However, American Midstream's financial profile has continued to deteriorate, which forced it to stop paying distributions to investors to appease its creditors. This material weakness caused ArcLight to revise its bid lower to $4.50 per unit earlier this year. It recently raised its offer to $5.25 per unit, which American Midstream has accepted.

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Now what

American Midstream has struggled mightily under a mountain of debt in recent years, which it has tried to address by selling assets and reducing and then eliminating investor distributions. The sale to ArcLight will enable the company to continue working on its turnaround plan outside the public market.