What happened
Shares of Sprague Resources (SRLP +0.00%) -- which describes itself as "a master limited partnership engaged in the purchase, storage, distribution and sale of refined petroleum products and natural gas" -- rose a quick 20% at the open of trading on June 3. Acquisition news released after the close on June 2 was the obvious reason, though the story actually dates back to January.
NYSE: SRLP
Key Data Points
So what
On Jan. 11, Sprague Resources announced that it had received an unsolicited acquisition offer from Hartree Partners, a private partnership. The proposed deal was an all-cash offer in which Hartree Partners would pay $16.50 per unit for the units of Sprague Resources that it didn't already own. Hartree Partners and its affiliates own 74.5% of Sprague Resources, so a deal looked fairly likely even at that time, but that was still just the start of the discussion.
Image source: Getty Images.
Although there were a number of factors driving the price point here, after the close on June 2, Sprague Resources announced that it had wrangled the offer up to $19 per unit. The unit price rose on the news, as you would expect. That figure, meanwhile, is roughly 27% higher than Sprague Resources' unit price before discussions commenced in January and nearly 19% higher than the close on June 1. At least on the surface, it seems that the independent directors, which were given the job of examining the offer, did a solid job of extracting as much value as possible for unitholders. Given Hartree Partners' significant ownership interest, the deal seems highly likely to be completed as currently outlined. In fact, the partnership isn't even putting it out to vote, since a majority of the units have already been cast as a "yes."
Now what
Sprague Resources unitholders basically have two options at this point. They can hold on and accept the cash or sell now to lock in the gains and put the proceeds to work right away. Given that the units are trading just a nickel or so below the offer price, the choice here is largely about timing. And while there is always a possibility that something goes wrong and a deal falls apart, that seems highly unlikely in this situation. If you have another investment you have been looking at but lacked the cash, it probably makes sense to consider selling the energy sector name so you can move on to a new investment idea.
