July 11 (Reuters) - Hedge funds Nut Tree Capital

Management and Caspian Capital said on Thursday they have made

an offer for Martin Midstream Partners ( MMLP ), aiming to

scuttle a bid from the fuels storage and transporter's largest

shareholder to buy it out.

The rival offer would give unitholders of Martin Midstream ( MMLP )

$4 per unit in cash, valuing the Kilgore, Texas-based company's

publicly-traded units at $156 million. The price is a 21%

premium to the unit's closing price on Wednesday.

The bid tops the $3.05 per unit cash offer which Martin

Resource Management Corporation (MRMC) said on May 24 it had

made to acquire all common units it did not already own. MRMC is

headed by Ruben S. Martin III, whose father in 1951 set up the

business to which MRMC and Martin Midstream ( MMLP ) trace their roots.

Martin Midstream's ( MMLP ) common units jumped on the news, trading

13% higher at $3.73 per unit at 12.45 p.m. Eastern time.

In a letter to the board committee set up to evaluate MRMC's

offer, the hedge funds said efforts to engage with Martin

Midstream ( MMLP ) on their bid had been rebuffed, despite it being more

financially attractive. It said MRMC faced conflicts of interest

and was trying to acquire Martin Midstream ( MMLP ) at below market

value.

"We believe the committee's insistence on the general

partner's support to engage in discussions regarding a premium

acquisition offer is inappropriate and calls into question the

committee's own independence," the letter said.

Martin Midstream ( MMLP ) and MRMC did not respond to requests for

comment.

Martin Midstream ( MMLP ) is structured as a tax-efficient master

limited partnership (MLP), meaning ownership is split into

publicly-traded common units, but also general partner (GP)

units which have outsized influence because the owner of these

controls the governance of the MLP.

The GP stake is controlled by MRMC, which also owns 15.7% of

the common units.

In a filing detailing its offer, MRMC said it only had

interest in buying out the company, and would not entertain

selling it to another party.

Dealmaking involving pipeline and storage companies has

steadily grown, as buyers want to secure assets located in

strategically-important locations, at a time when developing new

energy infrastructure has proven challenging in many places.

Martin Midstream ( MMLP ) offers storage and transportation services

for fuels and petrochemicals. It also manufactures fertilizers

and lubricants, with its operations concentrated along the U.S.

Gulf coast.

Both Nut Tree Capital and Caspian Capital are New York-based

funds which focus on distressed middle-market companies.