Mergers & Acquisitions

Lehigh Gas Makes Room for Zoomerz

CEO says deal provides regional scale; describes expansion opportunities, competitive landscape

ALLENTOWN, Pa. -- In an acquisition that is "highly complementary" to the Rocky Top deal announced earlier this month, Lehigh Gas Partners LP has entered into an asset purchase agreement with Rogers Petroleum Inc. and affiliates to purchase 14 gas stations, assume the leases for three stations and purchase certain other assets and equipment at the 17 sites for total consideration of $21.1 million.

The deal is expected to close during the third quarter of 2013. The partnership expects to fund the transaction through funds available under its corporate credit facility.

As reported in a Raymond James/CSP Daily News Flash, the 17 sites are located in eastern Tennessee; 13 of the sites are Zoomerz-branded sites and the remaining four sites are Exxon branded. The partnership is acquiring the Zoomerz trademark and brand as part of the transaction.

Lehigh Gas Partners has agreed to lease or sublease the 17 sites in a 15-year agreement to Lehigh Gas - Ohio LLC, which separately agreed to purchase fuel and merchandise inventory and certain other assets at the sites from Rogers Petroleum. The partnership will also supply fuel to Lehigh Gas - Ohio at these sites under a 15-year agreement.

Rogers Petroleum Inc., based in Morristown, Tenn., opened its first Zoomerz store in 1995.

In early August, Lehigh Gas entered into an asset purchase agreement with Rocky Top Markets LLC and Rocky Top Properties LLC on Aug. 1, 2013, purchasing 30 gas stations in the Knoxville, Tenn., area. It also entered into leases for four stations, assumed seven third-party supply contracts and purchase certain equipment and other assets at the sites for a total consideration of $36.9 million.

In late Dec. 2012, Lehigh Gas acquired the 45-unit Express Lane Inc. of Lynn Haven, Fla., for $43 million and another 24 stores in northeastern Pennsylvania from related entities Dunmore Oil Co. Inc. and JoJo Oil Co. Inc. for $28.5 million.

"We are excited to acquire the Rogers portfolio. The assets are high quality assets and highly complementary to the Rocky Top acquisition that we announced last week," said chairman and CEO Joe Topper. "Together, these two portfolios provide us scale in the region and a solid platform to further expand."

During the company's second-quarter earnings call, Topper told analysts, "There's just still an attractive group of acquisitions that are available in the multiples that would like to buy. There are some transactions that are going higher than we think and there are some transactions that are going lower for different reason. I guess at this point, we are probably looking at somewhere between five and eight different transactions that are in the multiple that are attractive to us. There are some things that are going at a higher multiple, but they are not as attractive to us."

Describing the competitive landscape for acquisition, he added, "7-Eleven [has] the lead in the marketplace for what they want to buy. Then of the large jobbers market, we would obviously have the leading edge based on our capital structure to do it, but there are other competitors out there that are trying to grow knowing that they need to grow in this environment and level of things; they want to follow where we went ... but I think we have still a year, year-and-a-half advantage on any next competitors."

Last week, Lehigh Gas reported net income for the second quarter of 2013 totaled $5.5 million, compared to $1.25 million for the second quarter of 2012. New income for the six months ended June 30, 2013, totaled $9.23 million, compared to a loss of $1.79 million in for the same 2012 period.

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 owns or leases more than 500 sites in nine states: Pennsylvania, New Jersey, Ohio, Florida, New York, Massachusetts, Kentucky, New Hampshire and Maine. The company is affiliated with several major oil brands, including ExxonMobil, BP, Shell, Chevron, Sunoco and Valero.

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