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ALLENTOWN, Pa. -– Energy Transfer Partners LP’s (ETP) recently announced purchase of Susser Holdings Corp. is a “wonderful transaction for both companies,” but it will affect Lehigh Gas Partners LP’s acquisition strategy moving forward, Chairman and CEO Joseph Topper said during the company’s 2014 first-quarter earnings call Thursday.
“[ETP] paid a formidable price [of $1.8 billion for Susser],” said Topper. “It will have an affect on us making larger acquisitions moving forward. So, we will focus on acquisitions in the $25 [million] to $75 million range.”
As for why transaction prices in the convenience store industry are going up, the chief executive explained that current buyers are being aggressive and want to lock in lower interest rates. One of the most aggressive buyers is ETP, he added.
“We ran up against them in a couple of transactions. We were a bidder for MACS [Mid-Atlantic Convenience Stores],” Topper revealed.
Despite ETP aggressively buying Sunoco Inc., MACS and now Susser Holdings, he said acquisitions are still available and Lehigh Gas is currently looking at “eight or nine deals, but they won’t happen soon because we are digesting the two deals we just announced.”
Topper was referring to Lehigh Gas’ recent acquisition of Petroleum Marketers Inc. (PMI) and the company's purchase of certain assets from Atlas Oil Co., both of which he said are key to Lehigh Gas’ future.
The PMI acquisition, which closed April 30 and carried a $61-million price tag, includes 85 convenience stores and nine co-located, branded quick-service restaurants along the Interstate 81 corridor in Virginia, as well as a petroleum products distribution business. Topper reiterated that the company expects to transfer the operations of certain sites to third parties and to affiliates outside of its master limited partnership structure.
The Atlas Oil transaction for $38.5 million, which is still pending, involves 55 wholesale supply contracts, two commission marketing contracts and 11 fee or leasehold sites in the Chicago area and northwest Indiana that are BP branded.
“We are looking forward to entering the Chicago market and growing our business,” Topper said on the earnings call. “That transaction should close in the second quarter."
Weather Comes Into Play
As for Lehigh Gas’ 2014 first-quarter earnings, seven weather events in the three months ended March 31 had a significant impact, as did lower motor fuel margins. Net income for the company came in at $1.4 million vs. $3.7 million in the same quarter a year ago.
On a positive note, revenues from fuel sales increased to $296 million during the most recent quarter, an increase of $78 million. In addition, Topper noted that fuel margins have improved during Lehigh Gas’ second quarter thus far.
Lehigh Gas Partners LP owns or leases 625 sites in 14 states, and distributes fuel to more than 1,100 locations.