DCC plc announced that DCC LPG has reached agreement with NGL Energy Partners LP (“NGL”) to acquire its Retail West LPG division, Hicksgas LLC (“Retail West” or “the business”), based on an enterprise value of US$200 million (£152 million). The acquisition represents DCC LPG’s entry into the US market and is a further significant step in DCC’s strategy to build a global LPG business over time. The US is one of the world’s largest LPG markets and is an attractive and growing market. It is also highly fragmented, with over 4,000 LPG distribution businesses operating in the market. The acquisition of Retail West will provide DCC with a substantial, high-quality presence in the US with leading market positions in a number of states. The business has an excellent customer base, a strong and well-invested operational infrastructure and an experienced management team. The transaction is expected to complete on 31 March 2018, following receipt of customary regulatory consents and separation from NGL.
The Retail West business
Headquartered in Illinois, Retail West has been in business for over 70 years and currently employs 390 people. It sells approximately 130,000 tonnes of LPG annually from 43 customer service locations and 58 satellite facilities. The business trades under three prominent regional brands, Hicksgas, Pacer Propane and Propane Central, and a number of smaller, local brands. Retail West has leading market positions in Illinois, Indiana and Kansas and also operates in seven other states across the Mid-West and North-West regions. The business has a long-established and loyal base of 65,000 customers. Approximately two thirds of annual volume is sold to residential customers, predominantly for heating purposes, with the balance sold to commercial and agricultural customers in both small and large bulk format. Retail West has a well-invested asset base of approximately 100 bulk storage facilities and a company-owned distribution fleet of over 150 vehicles. Retail West also owns the majority of tanks on customer premises. The business has an experienced and long-serving management team who have a strong track record of delivering both organic and acquisition growth. It has operated as a standalone division within NGL and will continue to operate and develop under the leadership of its existing management team, post completion of the acquisition.
Retail West is expected to initially deliver an annual EBITDA of approximately $28 million (£21 million) and EBITA of $20 million (£15 million). The acquisition will be earnings accretive from completion and the after tax cash payback will be approximately 10 years. The business is very well placed to continue its track record of profitable organic growth and also provides a base for synergistic acquisition activity, both of which would further enhance returns.
Donal Murphy, Chief Executive of DCC plc, said today: “The acquisition of Retail West in the US is an exciting development for DCC and is consistent with our ambition to build a substantial presence in the global LPG market. Our LPG business has grown significantly in recent years and Retail West will give DCC a material platform for development in the large, fragmented and growing LPG market in the US. We very much look forward to welcoming the Retail West management and employees into the DCC Group and working together to grow and develop Retail West into the future”.