Business Context and Reporting Period
This Form 8-K filing by Global Partners LP (the "Partnership") reports on a significant asset acquisition completed on September 30, 2010. The transaction was executed by Global Companies LLC, a wholly owned subsidiary of the Partnership, involving the purchase of retail gas stations and supply rights from ExxonMobil Oil Corporation and Exxon Mobil Corporation.
Key Financial Metrics and Transaction Details
- Acquisition Price: Approximately $202 million.
- Assets Acquired: 190 Mobil branded retail gas stations located in Massachusetts, New Hampshire, and Rhode Island.
- Asset Composition: 152 stations are owned; 38 are leased. Of the 190 stations, 42 are Company Operated Sites and 148 are Dealer Leased Sites.
- Supply Rights: Rights to supply fuel to the 190 acquired stations plus 31 additional Dealer Owned Sites (221 total Sites).
- Historical Volume: The Sites sold approximately 370 million gallons of fuel in 2009 (95 million gallons at Company Operated Sites).
- Environmental Liabilities: The Partnership assumed liabilities with an estimated remediation cost of approximately $30 million to be expended over an extended period.
- Brand Fee Agreement: A 15-year agreement with ExxonMobil; Global will pay approximately $9 million for 2011.
- Management Fees: Alliance Energy LLC will manage operations for an aggregate annual fee of $2.6 million, commencing October 1, 2010.
Material Changes and Operational Structure
The acquisition represents a material expansion of the Partnership's footprint in the New England region. The transaction was completed in multiple phases between September 8 and September 30, 2010. Key operational changes include:
- Management: Alliance Energy LLC (approximately 95% owned by the Slifka family, who also own the Partnership's general partner) entered into Facilities Management Agreements to supervise day-to-day operations for an initial three-year term.
- Employment: All station-level employees at Company Operated Sites and 13 field supervisory employees from ExxonMobil were hired by Alliance.
- Dealer Agreements: Supply/lease agreements for Dealer Leased Sites generally have three-year terms with renewal options. Supply agreements for Dealer Owned Sites are generally longer term.
Outlook, Risks, and Contingencies
The Partnership intends to continue operating the Sites under the Mobil brand. The filing highlights several ongoing relationships and risks:
- Wholesale Supply: The Partnership is responsible for securing its own wholesale fuel supply, including sourcing, delivery, storage, and distribution systems.
- ExxonMobil Relationship: ExxonMobil accounted for approximately 22% of the Partnership's consolidated sales for the year ended December 31, 2009. Long-term throughput contracts exist for five refined products terminals acquired in 2007.
- Environmental Risk: The Partnership has assumed environmental liabilities with a projected remediation cost of $30 million.
- Management Liability Cap: Alliance's aggregate liability for claims arising from fraud, gross negligence, or willful misconduct is capped at $5 million over and above insurance proceeds.
Investor Verification Checklist
- Verify the total capital outlay of $202 million and the funding source for the acquisition.
- Confirm the timeline and total cost of the $30 million environmental remediation liability.
- Review the terms of the 15-year Brand Fee Agreement and the $9 million fee obligation for 2011.
- Assess the impact of the $2.6 million annual management fee paid to the related party, Alliance Energy LLC.
- Monitor the concentration risk regarding ExxonMobil, which represented 22% of prior year sales.