Business Context and Reporting Period
This Form 8-K is filed by Lehigh Gas Partners LP (the "Partnership") on April 17, 2014, reporting events occurring on April 16, 2014. The filing details the entry into a Material Definitive Agreement to acquire assets from affiliates of Atlas Oil Company ("Atlas").
Key Financial Metrics and Transaction Details
The Partnership has agreed to purchase 55 wholesale supply contracts, 2 commission marketing contracts, 11 fee or leasehold sites, and associated short-term financing assets. The financial terms of the transaction are as follows:
- Base Consideration: $38,500,000 for the Sites and assets.
- Financing Assets: Approximately $11.9 million (face value) for short-term financing assets.
- Total Consideration: Approximately $50.4 million, subject to closing adjustments.
- Closing Date: Scheduled for the second quarter of 2014.
This filing does not provide the Partnership's current revenue, profit, cash flow, margins, debt, or liquidity metrics.
Material Changes and Agreements
The primary material change is the execution of the Asset Purchase Agreement. Key contractual provisions include:
- Breach Penalties: If the Partnership breaches, Atlas is entitled to $3,000,000 in liquidated damages. If Atlas breaches, the Partnership is entitled to incurred costs (capped at $100,000) and, under certain conditions, a $3,000,000 break fee.
- Non-Compete Agreement: Sam Simon, CEO of Atlas, agreed to a non-compete and non-solicitation agreement. He cannot engage in wholesale distribution or own/operate retail facilities within a 1-mile radius (or 0.5-mile in Cook County, IL) of the acquired Sites for one year post-closing. He is also restricted from constructing new facilities within a 1-mile radius for five years post-closing.
Guidance, Outlook, and Risks
The filing does not contain updated financial guidance or management commentary regarding future earnings outlook. The primary risks identified are contingent on the closing of the transaction:
- Closing Risk: The transaction is subject to customary closing conditions.
- Financial Contingency: The Partnership faces a potential $3,000,000 liability if it fails to close the deal due to a breach of the agreement.
Investor Verification Checklist
- Verify the final closing date and any adjustments to the $50.4 million total consideration.
- Confirm the specific terms of the short-term financing assets being acquired.
- Review the full Asset Purchase Agreement (Exhibit 2.1) for detailed representations, warranties, and indemnity provisions.
- Monitor the Partnership's capital structure to assess the impact of the $50.4 million expenditure on liquidity.