Heartland Grows in Middle America

Purchases Lee Oil's 23 convenience stores and 35 petroleum supply contracts

MIDDLESBORO, Ky. -- Two months after signing a letter of intent, Heartland Inc. closed on the purchase of Lee Oil Co., as reported in a CSP Daily News Flash yesterday, for cash, stock and promissory notes in exchange for 100% of the stock in the company's businesses on October 1. Lee Oil's businesses include Lee Food Marts and Lee Enterprises.

The purchase makes Heartland a company with sales in excess of $130 million and a corresponding EBITDA of approximately $4.25 million, with an eye on growing as an oil distributor.

Middlesboro, Ky.-based Lee Oil is a multi-state petroleum marketer [image-nocss] and distributor with approximately 36 million gallons of petroleum product sales during the year ended December 2007. Lee has more than 35 long-term petroleum supply contracts with retail and wholesale customers. In addition, Lee Food Marts operates 23 convenience stores in Virginia, Tennessee and Kentucky.

Additional sales in home heating oil, bulk oil lubes and oil burners make Lee Oil Co. a diversified petroleum distributor for the markets it serves.

"We are happy to have this acquisition completed," Thomas Miller, secretary of Heartland Inc., said in a press release. "Lee Oil Co. is considered the first step in a planned expansion into the oil-distribution industry. We have commenced the review of other opportunities in this area, and management believes prospects for regional growth due to economies of scale using Lee Oil management expertise are promising."

Attempts by CSP Daily News to contact Heartland Inc. for comment were unsuccessful at press time.

Cumberland Gap, Tenn.-based Heartland is a 17-year-old public company that is developing broad product and service offerings—from heavy machining and fabricated steel products to oil distribution and retail—to provide economic protection and growth opportunities for investors. Heartland subsidiary Mound Technologies Inc., Springboro, Ohio, fabricates complete signs for gas stations and travel centers, including aluminum panels and lighting. Clients include TravelCenters of America LC, Westlake, Ohio.

Heartland announced at the end of July that it had signed a letter of intent to purchase Lee Oil Co., noting the combined Lee companies' sales exceeded $104 million in 2007. The combined Lee companies, Heartland said, met the criteria established by Heartland's board of directors to pursue acquisitions that have a history of good cash flow in retail and light manufacturing that are located in the central part of the United States.

Consideration for the purchase of Lee Oil Co. includes a payment to the former owners of the Lee companies, including Terry Lee, the CEO and a director of Heartland, of an aggregate of $3.25 million in cash, promissory notes in the amount of $3.25 million and 2.5 million shares of common stock in Heartland Inc.

To fund the cash purchase price of the acquisition, Heartland entered into a loan agreement with Choice Financial Group of Grand Forks, N.D. The note with Choice Financial Group has an interest rate of 7.75%, amortizes on a monthly basis and is required to be paid in full by Sept. 30, 2011.