Mergers & Acquisitions

Empire Petroleum Partners Forming MLP

Offers details on IPO, wholesale acquisition strategy

DALLAS -- With a strategy to expand mainly through continued wholesale acquisitions, Empire Petroleum Partners LP has filed a registration statement with the U.S. Securities & Exchange Commission (SEC) for an initial public offering (IPO) to form a master limited partnership (MLP).

Empire Petroleum IPO MLP (CSP Daily News / Convenience Stores / Gas Stations)

As reported in a 21st Century Smoke/CSP Daily News Flash, the Dallas-based company, which distributes fuel to more than 1,300 gas stations and convenience stores across 27 states and the District of Columbia, hopes to raise $100 million with the IPO, according to a report by Law360.

Empire distributes motor fuel to 1,060 sites operated by independent dealers; 190 sites operated by independent consignment agents, where it sells motor fuel directly to consumers but do not operate the sites; and 61 company-operated sites. The motor fuel distribution network serves retail fuel outlets primarily in its four core markets of Texas, the Southeast, the Great Lakes and the Mid-Atlantic regions.

"We believe that our long-term, fixed-margin motor fuel supply agreements with independent dealers … provide us with stable and predictable cash flow that will support consistent distributions to our unitholders. We intend to grow our business primarily through acquisitions of wholesale fuel supply agreements, which we believe will add to the scale, stability and diversification of our motor fuel distribution network," the company said in the SEC filing.

The company intends to capitalize on the highly fragmented distributor market. As of January 2015, there were approximately 4,850 domestic wholesale fuel distributors, it said, citing data from Petroleum Trends International Inc., reflecting the fragmented nature of the industry. In addition, in recent years, major oil companies have been increasing the minimum volume, scale and credit requirements for their motor fuel distribution partners.

"As a result, we believe there is considerable opportunity for consolidation in our industry given the large number of wholesale fuel distributors with limited scale that may consider selling their businesses," said the company.

"Since 2011, we have pursued an acquisition growth strategy and have successfully completed 12 acquisitions, increasing our annual volume of distributed motor fuel at a compound annual growth rate of 77% from 165 million gallons in 2011 to 919 million gallons in 2014," Empire said.

"We believe that targeting acquisitions in and around our current core markets will allow us to improve our purchasing power with major oil companies and leverage our existing personnel in these markets. In addition, we have a proven ability to expand into and quickly achieve scale in new markets, and we will continue to evaluate acquisition opportunities in new markets. We intend to pursue high-quality assets in attractive markets and focus on the acquisition of long-term wholesale motor fuel supply agreement portfolios," the company said.

“Following the accumulation of significant assets, this is the culmination of their objective, which is to file for an IPO and officially become a publicly traded MLP, which others [recently GPM] have done, and Lehigh Gas before them.  It's a trend. By market standards, these are very small MLPs and IPO issues. But the returns for the general partners are significant,” said Ken Shriber, managing director of Petroleum Equity Group, Chappaqua, N.Y.  "These small MLPs that come onto the market represent a significant movement towards the continued consolidation in the industry, and in the future, some of the MLP might merge, or sell as well. That's a realistic option down the road."

In other company news, Jeff Goodwin has joined Empire Petroleum Partners as COO. Most recently, he was senior vice president of field operations and for Murphy Oil and Murphy USA. Previously, he was with The Pantry and Hess.

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