Irish company DCC Group has entered the US LPG market with a $200million buy-up of NGL’s retail propane business.
NGL will retain this business through closing, which is scheduled for March 31, 2018 and will also retain all profits generated through the closing date.
These assets are expected to generate approximately $20 million in Adjusted EBITDA from December 1, 2017 through March 31, 2018 based on NGL’s current public guidance, resulting in a total value proposition to NGL of approximately $220 million.
“I believe this is a very positive transaction for both NGL and DCC. Shawn Coady and his team have built a tremendous business, providing DCC with a highly respected, experienced management team and a turnkey platform through which to build their U.S. retail propane operations,” said NGL’s chief executive Mike Krimbill.
“The sale reflects a big step towards achieving our target compliance leverage of 3.25x or better. The terms of the transaction provide for a $20 million cash deposit on announcement that we can immediately deploy towards debt repayment. The remaining $180 million in cash proceeds, combined with the retained cash flows from the business generated through this heating season, provide significant cash for leverage reduction and allows us to maintain our earnings targets for this fiscal year.”
Shawn Coady, NGL’s president of retail, said: “We are very excited to enter a new chapter of our business with DCC and build on the success we’ve had prior to and since merging with NGL.
“DCC’s extensive experience in retail propane across multiple international markets, their desire to retain all of our employees, and their vision for growth in the U.S. provides a compelling opportunity for the collective team.”
Mr Coady will be joining DCC in a management role upon closing.
The Retail Propane Business subject to this transaction is comprised of NGL’s operations across 10 states in the mid-continent and western portions of the United States, including its flagship Hicksgas Propane business in Illinois and Indiana, along with Pacer Propane, Propane Central and a number of smaller, local brands.
NGL’s Liquids Logistics operating segment will provide propane supply to DCC along with numerous other propane retailers throughout the United States.
NGL will retain its retail propane businesses located in the northeastern, mid-Atlantic and southeastern sections of the United States, where the Partnership expects to continue to grow its footprint through conversions from other fuels, population growth and accretive acquisitions.
The sale of the retail propane business will help NGL execute on its goal to reduce leverage, with the cash proceeds going towards debt reduction.
Closing of the sale is subject to regulatory and other customary closing conditions.
Wells Fargo Securities, LLC is serving as NGL’s exclusive financial advisor and McAfee & Taft in Tulsa, Oklahoma is serving as NGL’s legal counsel.