BETHLEHEM, Pa.-- A prominent East Coast fuels marketer that less than 2 years ago sustained negative earnings has filed plans for an initial public offering (IPO).
Lehigh Gas Partners LP, which lost $3 million in 2010 only to rebound with a $9.6 million profit last year, is seeking to raise up to $120 million to help repay debt and reimburse its general partner. The company has contracted Raymond James (which recently acquired Morgan Keegan), as underwriter.
A Raymond James official, citing restrictive Securities & Exchange Commission (SEC) regulations, declined comment on the pending IPO. Under the plan, Lehigh would list common units on the New York Stock Exchange under the symbol LGP.
As reported in a Raymond James/CSP Daily News Flash yesterday, Lehigh, whose network of gas stations stretches from New England to Appalachia, said it plans to use proceeds to reduce borrowing under its new credit facility and reimburse the Topper Group and Lehigh Gas Corp., affiliates that contribute assets to the limited partnership.
Founded in 1992 by Joe Topper Jr in Bethlehem, Pa., the company blazed an aggressive expansion, notching the first of several acquisitions in 1997 when it picked up a full-line Texaco distributorship. Over the next seven years, the fuel wholesaler increased the number of petro flags, adding Exxon, Mobil, Gulf, Sunoco, Shell and Hess and, in 2006, entering a brand affiliation with Valero.
All the while, Lehigh padded its company and dealer-run network, acquiring swaths of Shell locations and ExxonMobil sites, including many On the Run c-stores, eventually raising its portfolio to 570 units, including 185 locations operated by independent dealers.
After years of growth, the company has experienced some retrenchment over the past 18 months, prompting some industry observers to say they are not surprised by Lehigh's decision to launch an IPO as a vehicle to reduce debt and free up working capital.
In that effort, Lehigh earlier this year placed 26 gas stations and convenience stores and one truckstop on the auction block, with the intent of redeploying funds to other areas of its business.
And about 16 months ago, the company sold 40 stores to Sunoco and a group of existing Lehigh dealers with plans of "monetizing assets in order to reinvest the capital," Tom Kelso of Matrix Capital Markets Groups Inc., which directed the sale, said in early 2011.
In Lehigh's most recent three-year financial cycle, revealed in the more-than-200-page SEC filing, the distributor enjoyed a significant spike in fuel revenues., topping $1.2 billion in 2011 after reporting $847 million in '10 and less than $500 million in 2009.
For the year ended Dec. 31, 2011, Lehigh distributed approximately 561 million gallons of motor fuels to 570 sites, of which more than half were owned or leased by the company. The marketer noted that by end of last year, it ranked among the 10 largest independent distributors in the U.S. of product for ExxonMobil, BP, Shell and Valero.
Most recently, Lehigh reported it had just entered into a master lease agreement to lease 120 sites from an affiliate of Jericho, N.Y.-based Getty Realty Corp., most of which are based in Massachusetts, New Hampshire and Pennsylvania.
Among the competitive advantages it lists in the SEC filing are prime real estate in the eight states of operation and what it calls a successful track record of growth, primarily from Big Oil.
"Many of our acquisitions have been from major integrated oil companies that have pursued a strategy of divesting their retail marketing operations," the company says in the SEC filing. "Our strong industry relationships and ability to complete acquisitions have allowed us to successfully find multiple sites and negotiate transactions that are on attractive terms."
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