DCC makes big US $200m acquisition

DCC, the parent company of Flogas Britain, has made its first acquisition in the US LPG market for $200m (£152m) as it bids to become a global entity.

The company announced it had purchased the Retail West LPG division of NG Energy Partners LP to the Stock Market this morning.

The deal is expected to complete by March 2018.

The company described the deal as a significant step in DCC’s strategy to build a global LPG business, highlighting that the US is the world’s largest LPG market. While the market is attractive and growing, it is also fragmented with more than 4,000 distributors.

Donal Murphy, chief executive of DCC, 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”.

Headquartered in Illinois, Retail West has been in business for over 70 years and currently employs 390 people. It sells approximately 130,000 tonnes1  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.

DCC said that Retail West has a well-invested asset base of approximately 100 bulk storage facilities and a companyowned 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 $281m (£21m) and EBITA of $201m (£15m). The acquisition will be earnings accretive from completion and the after tax cash payback will be approximately 10 years.

The deal is expected to complete by March 2018. DCC shares rose 25p or 0.27% changing hands at 7,310p