Lehigh Stops In for PMI Deal

Lehigh Gas Partners makes second acquisition in less than a month

Petroleum Marketers Inc. (PMI) Lehigh Gas Partners (CSP Daily News / Convenience Stores)

ALLENTOWN, Pa. -- In its second deal in less than a month, Lehigh Gas Partners LP announced today that it acquired, effective April 30, 2014, Roanoke, Va.-based Petroleum Marketers Inc. (PMI) for net total consideration of $61 million. PMI operates two primary lines of business: convenience stores and petroleum products distribution.

In mid-April, Lehigh Gas Partners announced the acquisition of Taylor, Mich.-based Atlas Oil Co.'s BP-branded assets in Chicago and northwestern Indiana--55 wholesale supply contracts, 11 fee or leasehold sites, two commission marketing contracts and certain other assets for total consideration of $38.5 million.

As reported in a 21st Century Smoke/CSP Daily News Flash, PMI operates 85 c-stores and nine co-located branded quick-service restaurants (QSRs) located primarily along the Interstate 81 corridor in Virginia, with a concentration in the Roanoke area. The c-stores operate under the company's proprietary brand, Stop In Food Stores.

Lehigh Gas Partners initially intends to operate the c-stores within the partnership and expects to transfer the operations of certain sites over time to third parties and to affiliate entities outside of the partnership.

For the 12-month period ending Dec. 31, 2013, the c-stores sold 91 million gallons of motor fuel, approximately 57 million and 23 million gallons of which were Shell and Exxon branded, respectively, and had $93 million in non-fuel revenue at its c-stores.

The petroleum products business distributes motor fuels and other petroleum products to customers throughout Virginia, West Virginia, Tennessee and North Carolina.

For the 12-month period ending Dec. 31, 2013, the company distributed approximately 191 million gallons of petroleum products.

"We are extremely excited about the acquisition of PMI," said Lehigh Gas Partners chairman and CEO Joe Topper. "PMI adds materially to our presence in Virginia and complements our locations in Tennessee along the I-81 corridor. We expect to be able to realize material synergies as we integrate our operations."

As part of the acquisition of PMI, Lehigh Gas Partners divested the lubricants portion of the petroleum products distribution business at closing for $14 million, which is reflected in the net total consideration for PMI of $61 million. It divested the lubricants business to an unrelated entity financed by Topper, with the intent to sell the business to an independent third party at a later date.

As part of the purchase agreement for the divestiture of the lubricants business, Lehigh Gas Partners is entitled to receive the profit, if any, from the sale of the lubricants business to an independent third party. The lubricants business divestiture transaction was reviewed and approved by the conflicts committee of the general partner of LGP.

In conjunction with the acquisition of PMI and the pending acquisition of the Atlas Oil assets, the partnership also amended its omnibus agreement with its general partner and Lehigh Gas Corp. with regards to the management fee. The revised management fee consists of a base monthly fee of $670,000 per month and a variable fee of between zero and 0.3 cents per gallon of wholesale fuel distributed and 1.5 cents per gallon of retail fuel sold.

Lehigh Gas Partners, Allentown, Pa., is a leading wholesale distributor of motor fuels and owner and lessee of real estate used in the retail distribution of motor fuels. Formed in 2012, Lehigh Gas Partners distributes fuel to more than 1,100 locations and owns or leases more than 625 sites in 14 states: Pennsylvania, New Jersey, Ohio, Florida, New York, Massachusetts, Kentucky, New Hampshire, Maine, Tennessee, Maryland, Delaware, West Virginia and Virginia. The company is affiliated with several major oil brands, including ExxonMobil, BP, Shell, Chevron, Sunoco, Valero, Gulf and CITGO. LGP ranks as one of ExxonMobil's largest distributors by fuel volume in the United States and in the top 10 for many additional brands.

Part of CSP's 2014 Convenience Top 101 retailers