DCC enters US fuel market with £200m acquisition

Irish sales, marketing and support services group DCC has entered the US fuel market after it reached an agreement with NGL Energy Partners to acquire its Retail West liquefied petroleum gas (LPG) division, Hicksgas for $200 million.

DCC said the acquisition was “a further significant step” in its strategy to build a global LPG business over time. The US is one of the world’s largest LPG markets and was described by DCC as “an attractive and growing market”.

“It is also highly fragmented, with over 4,000 LPG distribution businesses operating in the market,” said the company.

“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.”

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The transaction is expected to complete on March 31st, 2018, following receipt of customary regulatory consents and separation from NGL.

Headquartered in Illinois, Retail West has been in business for more that 70 years and 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.

Leading market positions

Retail West has leading market positions in Illinois, Indiana and Kansas and also operates in seven other states across the midwest and northwest 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 more than 150 vehicles. Retail West also owns the majority of tanks on customer premises.

It has operated as a standalone division within NGL and will continue to operate and develop under the leadership of its existing management team, after completion of the acquisition.

Retail West is expected to initially deliver 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.

‘Global leader’

DCC said the strategy was to be a “global leader” in the sales and marketing of LPG, with a developing business in the retailing of natural gas and electricity.

“The acquisition of Retail West is in line with this strategy and will give DCC a material footprint in the very large, fragmented and growing US LPG market,” it said. “It marks DCC LPG’s entry into the US market and provides a substantial base for further development in the region.”

DCC chief executive Donal Murphy said the acquisition of Retail West in the US was "an exciting development" for the company, and was "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,” he said.

An analyst with Merrion said the acquisition was “a strategic milestone” for the group. “We expect further deals in the region over the coming months,” he added.