Rose Rock Midstream LP
Robbins Arroyo LLP: Acquisition of Rose Rock Midstream LP (RRMS) by SemGroup Corporation (SEMG) May Not Be in Shareholders’ Best Interests
Robbins Arroyo LLP is investigating the proposed acquisition of Rose Rock Midstream LP (NYSE: RRMS) by SemGroup Corp. (NYSE: SEMG). On May 31, 2016, the two companies announced the signing of a definitive merger agreement pursuant to which SemGroup will acquire Rose Rock. Under the terms of the agreement, Rose Rock unitholders will receive 0.8136 shares of SemGroup for each unit of Rose Rock they own, the value of which is equivalent to $24.00 per unit of Rose Rock.
Is the Proposed Acquisition Best for Rose Rock and Its Unitholders?
Robbins Arroyo LLP’s investigation focuses on whether the board of directors at Rose Rock is undertaking a fair process to obtain maximum value and adequately compensate its unitholders.
As an initial matter, the $24.00 merger consideration represents a premium of 0.0% based on Rose Rock’s closing price on May 27, 2016. This premium is significantly below the average one-day premium of nearly 76% for comparable transactions within the past three years. In the last three years, Rose Rock traded as high as $62.79 on September 2, 2014, and most recently traded above the merger consideration – at $24.06 – on May 27, 2016.
On May 5, 2016, Rose Rock reported strong earnings results for its first quarter 2016. Total revenues for the quarter were $204 million, an increase of 51% compared to the same period last year. Net income for the quarter was $20.6 million, an increase of 109% compared to the same period last year. Additionally, Rose Rock has beat consensus analyst estimates for revenue in three out of the past four quarters. In commenting on these results, Rose Rock Chief Executive Officer Carlin Conner remarked, “Rose Rock’s first quarter results were right in line with expectations and highlight the benefits of our fee-based business model and our continued focus on efficient execution. We’ve maintained our solid financial performance and continue to execute in a cost effective manner, positioning Rose Rock to successfully navigate these challenging market conditions.”
In light of these facts, Robbins Arroyo LLP is examining Rose Rock’s board of directors’ decision to sell the company now rather than allow unitholders to continue to participate in the company’s continued success and future growth prospects.
Rose Rock unitholders have the option to file a class action lawsuit to ensure the board of directors obtains the best possible price for shareholders and the disclosure of material information.
Rose Rock shareholders interested in information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.