Lehigh Has Eyes for O'Connell Oil

Pa. retailer performing "due diligence" in anticipation of potential merger

Steve Dwyer, CSP Reporter

PITTSFIELD, MASS. -- In a move that would enable it to significantlygrow its retail holdings, Bethlehem, Pa.-based Lehigh Gas is exploring a possible acquisition of Pittsfield, Mass.-based O'Connell Oil Associates. It's a deal that would also bolster Lehigh's retail presence in western New England.

The deal would involve the sale of O'Connell's 30 conveniences stores, seven gas stations and home heating oil distribution and service operation, said David Wesley, CFO for O'Connell Oil.

"The merger talks are in the initial stages now," Wesley told CSP Daily News. "There's interest on [image-nocss] both parties' parts [to consummate a deal], but there is a lot of due diligence that needs to be completed first [on Lehigh's part]. This will probably take two to three months before anything is finalized."

Wesley, who said he plans to retire come spring, indicated he could not shed further light on merger details, deferring to O'Connell Oil president Michael Sobon, who was unavailable. Executives at Lehigh were also unavailable to provide details.

Wesley indicated that O'Connell Oil has been conservatively active in acquiring retail units over the past decade, moves that have positioned the organization as an attractive merger partner. Among its recent additions, O'Connell Oil acquired several Shell-branded units in the Springfield, Mass., market, Wesley told CSP Daily News.

From a retail ownership standpoint, Lehigh Gas—with 67 company-owned retail units—is almost double the size of O'Connell Oil, plus the Pennsylvania marketer also holds three interstate truckstops, 355 dealers and six subdistributors. Lehigh markets fuel under ExxonMobil, Shell, Valero, Sunoco, On-the-Run, Gulf and Hess marks. The company also operates Dunkin' Donuts shops within the retail network.

Entering the Pittsfield, Mass. market, located near the New York border about 100 miles east of Albany, would enable Lehigh to branch out geographically. The privately held fuel distribution and convenience store retailer has a presence in Pennsylvania, New York, New Jersey and Ohio.

O'Connell Oil, founded in 1925, sells fuel under Shell, Mobil and CITGO brands. The company employs about 320 people in its various businesses and has between 7,000 and 8,000 heating oil customers, said Wesley, adding that the potential deal with Lehigh Gas is one of several that have manifested in recent years, including one merger that was close to completion before falling through.