Business Context and Reporting Period
This Form 8-K was filed by CrossAmerica Partners LP (NYSE: CAPL) on December 16, 2014. The report details two significant corporate events: the entry into a material definitive agreement regarding a fuel supply interest contribution and the final allocation of the purchase price for the acquisition of Nice N Easy Grocery Shoppes, Inc.
Key Financial Metrics and Transaction Details
- Fuel Supply Contribution: The Partnership agreed to acquire a 5% limited partner interest in CST Fuel Supply LP for approximately $50.4 million.
- Consideration Method: Payment will be made via the issuance of 1,497,946 Common Units, valued based on the 20-day volume-weighted average trading price prior to execution.
- Nice N Easy Purchase Price: The final aggregate purchase price allocated to the Partnership is $53.6 million, with CST Brands paying $24.4 million.
- Intercompany Settlement: CST Brands will pay approximately $11.4 million to the Partnership to adjust the purchase price allocation.
- Future Revenue Commitment: A new 10-year fuel distribution agreement mandates the sale of at least 1.57 billion gallons of motor fuel annually at a fixed net margin of $0.05 per gallon.
Material Changes and Agreements
The filing reports the execution of a Contribution Agreement effective January 1, 2015, subject to customary closing conditions. This transaction involves CST Services contributing fuel supply interests to the Partnership. Additionally, the filing finalizes the financial terms of the November 1, 2014, joint acquisition of Nice N Easy assets, adjusting the initial purchase price split between the Partnership and CST Brands.
Management Commentary, Risks, and Contingencies
- Related Party Approval: Both transactions were unanimously approved by the Conflicts Committee of the General Partner's board, which retained independent legal and financial advisors.
- Fairness Opinion: Independent financial advisors opined that the consideration paid by the Partnership is fair to unaffiliated common unitholders from a financial point of view.
- Indemnification Limits: The Contribution Agreement includes indemnification provisions, capping liability for losses at 20% of the dollar value of the consideration as of the Closing Date, subject to exceptions.
- Closing Conditions: The fuel supply transaction is contingent upon customary closing conditions and the execution of the Fuel Distribution Agreement.
Investor Verification Checklist
- Verify the closing of the Contribution Agreement on or after January 1, 2015.
- Confirm the issuance of 1,497,946 Common Units and the resulting dilution impact.
- Monitor the execution of the 10-year Fuel Distribution Agreement and the delivery of 1.57 billion gallons annually.
- Review the final financial statements to confirm the $53.6 million asset capitalization for Nice N Easy.
- Assess the impact of the $11.4 million cash receipt from CST Brands on the Partnership's liquidity.