ALLENTOWN, PA (May 1, 2014) – Lehigh Gas Partners LP (NYSE: LGP), a prominent name in the motor fuel distribution and retail sector, has officially announced its strategic acquisition of Petroleum Marketers, Inc. (PMI). The transaction, finalized on April 30, 2014, sees Lehigh Gas Partners fortifying its market presence with the addition of PMI’s extensive network for a net total consideration of $61 million. This acquisition marks a significant step for Lehigh Gas Partners, enhancing its operations and broadening its reach within key geographical areas.
Petroleum Marketers, Inc., headquartered in Roanoke, VA, brings to Lehigh Gas Partners a robust business model encompassing two core segments: convenience stores and petroleum product distribution. PMI’s convenience store division operates an impressive portfolio of 85 strategically located convenience stores. These locations are further complemented by 9 co-located branded quick-service restaurants, primarily situated along the high-traffic Interstate 81 corridor in Virginia, with a strong concentration in the Roanoke region. Demonstrating strong performance, these convenience stores achieved a substantial distribution volume of 91 million gallons of motor fuel in the twelve months leading up to December 31, 2013. A significant portion of this volume was branded fuel, with approximately 57 million gallons under the Shell banner and 23 million gallons carrying the ExxonMobil brand. Furthermore, the convenience store operations generated a solid $93 million in non-fuel revenue during the same period, operating under PMI’s well-established proprietary brand, Stop in Food Stores. Lehigh Gas Partners plans to initially integrate and operate these convenience stores within its existing framework. Looking ahead, the Partnership anticipates strategically transferring the operations of select sites to third-party operators and affiliate entities outside of the Partnership, optimizing its operational efficiency and asset management.
PMI’s petroleum products distribution arm significantly bolsters Lehigh Gas Partners’ capabilities in the wholesale fuel sector. This division is responsible for distributing motor fuels and a range of other petroleum products to a diverse customer base spanning Virginia, West Virginia, Tennessee, and North Carolina. In the twelve-month period ending December 31, 2013, this segment distributed approximately 191 million gallons of petroleum products, highlighting its substantial market reach and operational scale. As part of the strategic acquisition agreement, Lehigh Gas Partners divested PMI’s lubricants distribution business at closing for $14 million. This divestiture, reflected in the net acquisition cost of $61 million, was made to an entity financed by Joe Topper, the Chairman and CEO of Lehigh Gas Partners, with a future plan to sell this lubricants business to an independent third party. Importantly, Lehigh Gas Partners retains the right to any profit from the subsequent sale of the lubricants business, adding a potential future revenue stream. This divestiture was carefully reviewed and approved by the conflicts committee of Lehigh Gas Partners’ general partner, ensuring transparency and adherence to corporate governance standards.
Joe Topper, Chairman and CEO of Lehigh Gas Partners, expressed considerable enthusiasm about the acquisition. “The acquisition of PMI is a very exciting development for Lehigh Gas Partners,” he stated. “PMI significantly strengthens our presence in Virginia and strategically aligns with our existing locations in Tennessee along the vital I-81 corridor. We anticipate realizing substantial operational synergies as we effectively integrate PMI into our operations,” Topper added, underscoring the strategic and financial benefits expected from this acquisition.
Concurrent with the PMI acquisition and the pending acquisition of the Atlas assets, Lehigh Gas Partners has also revised its Omnibus Agreement with its general partner and Lehigh Gas Corporation concerning management fees. The amended fee structure now comprises a base monthly fee of $670,000, coupled with a variable fee component. This variable fee is structured between zero and $0.003 per gallon of wholesale fuel distributed and $0.015 per gallon of retail fuel distributed, further aligning management incentives with operational performance and growth. Detailed information regarding these amendments can be found in the Form 8-K filing submitted to the SEC on May 1, 2014, providing full transparency and compliance with regulatory requirements.
The funding for the PMI transaction was secured under Lehigh Gas Partners’ existing credit facility, demonstrating the company’s robust financial capacity and efficient capital management.
About Lehigh Gas Partners
Lehigh Gas Partners, based in Allentown, PA, stands as a leading wholesale distributor of motor fuels and a prominent owner and lessee of real estate utilized for retail fuel distribution. Established in 2012, Lehigh Gas Partners has rapidly grown to distribute fuel to over 1,100 locations and owns or leases more than 625 sites across fourteen states, including Pennsylvania, New Jersey, Ohio, Florida, New York, Massachusetts, Kentucky, New Hampshire, Maine, Tennessee, Maryland, Delaware, West Virginia, and Virginia. The company boasts affiliations with numerous major oil brands, such as ExxonMobil, BP, Shell, Chevron, Sunoco, Valero, Gulf, and Citgo, solidifying its position in the fuel distribution landscape. Notably, Lehigh Gas Partners ranks as one of ExxonMobil’s largest distributors by fuel volume in the United States and consistently achieves top-tier distributor status for many other prominent brands, underscoring its scale and influence in the industry. For more in-depth information, please visit www.lehighgaspartners.com.
CONTACTS:
INVESTORS:
Karen Yeakel
Vice President, Investor Relations
Lehigh Gas Partners
610-625-8126
Forward-Looking Statements
This press release includes forward-looking statements regarding plans, objectives, and future performance, subject to risks and uncertainties detailed in the company’s SEC filings, including Form 10-K. Actual results may vary. Lehigh Gas Partners undertakes no obligation to update these statements. Reliance on forward-looking statements should be considered cautiously.
