Business Context and Reporting Period
This Form 8-K Current Report is filed by Global Partners LP for the reporting period ending March 1, 2012. The filing documents the completion of a material acquisition and the entry into several definitive agreements related to the transaction.
Key Financial Metrics and Transaction Details
The Partnership acquired 100% of the outstanding membership interests in Alliance Energy LLC ("Alliance") from AE Holdings Corp. ("AEHC").
- Consideration: Issuance of 5,850,000 common units representing limited partner interests in the Partnership to AEHC.
- Debt Assumption: Assumption of approximately $180.0 million in long-term debt of Alliance, subject to post-closing adjustments.
- Assets Acquired: A portfolio of approximately 540 gasoline stations located in New England, New York, New Jersey, and Pennsylvania.
- Asset Composition: Alliance owns or holds long-term leases on approximately 253 sites; supply contracts cover the remaining sites.
Financial statements and pro forma financial information required for this acquisition are not included in this filing and will be submitted by amendment within 71 calendar days.
Material Changes and Agreements
The filing details several material agreements executed on March 1, 2012:
- Registration Rights Agreement: The Partnership agreed to file up to two registration statements to register securities held by AEHC or affiliates of the General Partner upon request.
- Business Opportunity Agreement: Directors Alfred A. Slifka and Richard Slifka (who control the General Partner) are prohibited from engaging in the Partnership's lines of business (wholesale/retail marketing, distribution, and storage of petroleum products) unless the Partnership declines the opportunity.
- Franchise and Supply Agreements: A new seven-year Distributor PMPA Franchise Agreement was established where Alliance will purchase all Mobil-branded fuel from Global Companies LLC. This includes a Volume Incentive Program Agreement providing per-gallon rebates.
- Termination of Prior Agreements: Previous shared services and facilities management agreements between the Partnership and Alliance were terminated.
Management Commentary, Risks, and Unusual Items
Management Changes: Andrew Slifka entered into an employment agreement to serve as Executive Vice President of the General Partner and President of the Alliance Gasoline Division. His compensation includes a $425,000 annual base salary, short-term cash incentives, long-term equity incentives, and discretionary bonuses. He is expected to be appointed to the Board in the second quarter of 2012.
Risks and Contingencies: The transaction involves related parties, as AEHC is approximately 95% owned by the Slifka family, who also control the General Partner. The terms were approved by the Board's conflicts committee, composed entirely of independent directors.
Unusual Items: The issuance of 5,850,000 common units to AEHC was exempt from registration under Section 4(2) of the Securities Act of 1933.
Investor Verification Checklist
- Verify the final post-closing adjustment amount for the assumed $180.0 million debt.
- Review the upcoming pro forma financial information (due within 71 days) to assess the impact on liquidity and leverage.
- Confirm the specific terms of the Volume Incentive Program Agreement regarding per-gallon rebates.
- Monitor the appointment of Andrew Slifka to the Board in Q2 2012 and any subsequent changes to board composition.
- Examine the full text of the Business Opportunity Agreement (Exhibit 10.1) for specific exclusions regarding the Slifka family's business activities.