Business Context and Reporting Period
This Form 8-K is a current report filed by Lehigh Gas Partners LP (the "Partnership") on August 7, 2013. The filing primarily announces the entry into a Material Definitive Agreement to acquire motor fuel assets in eastern Tennessee. Additionally, the Partnership references a press release issued on August 8, 2013, regarding results of operations for the quarter ended June 30, 2013, though the specific financial figures are contained in the attached press release and not detailed within the body of this filing.
Key Financial Metrics and Transaction Details
- Transaction Value: The total consideration for the asset purchase is $21.125 million.
- Security Deposit: $950,000 is to be paid within three days of the agreement execution.
- Assets Acquired: 14 motor fuel stations to be purchased outright; leases for 3 additional stations to be assumed; the "Zoomerz" trademark and related equipment.
- Liquidity and Debt: The filing does not provide specific data on the Partnership's current cash flow, total debt, or liquidity ratios. It notes that the closing is scheduled for the third quarter of 2013.
- Financial Results: Specific revenue, profit, and margin figures for the quarter ended June 30, 2013, are not provided in the text of this filing; they are referenced as being in Exhibit 99.1.
Material Changes and Transaction Structure
The Partnership entered into an Asset Purchase Agreement with Rogers Petroleum, Inc. and its affiliates. A material aspect of this transaction involves a related party arrangement:
- Related Party Transaction: Lehigh Gas-Ohio, LLC ("LGO"), an entity managed by the Partnership's CEO and Chairman, will acquire the retail assets (fuel and merchandise inventory) related to the sites.
- Post-Closing Arrangement: Following the closing, the Partnership and LGO will enter into lease and fuel distribution agreements for the 17 sites. The Conflicts Committee of the General Partner determined these terms are fair and reasonable.
- Non-Compete Provisions: Sellers agreed to a 5-year non-compete regarding retail motor fuel facilities and employee solicitation in the geographic area. The Partnership agreed not to sell wholesale fuel to certain existing Seller accounts for 5 years.
Guidance, Risks, and Contingencies
- Closing Conditions: The transaction is subject to customary conditions. If the Partnership discovers "Inspection Defects" within 45 days, it may exclude affected assets or reduce the price. If more than four sites have defects, the Partnership may terminate the agreement entirely.
- Liquidated Damages: In the event of a breach by either party that is not cured within the prescribed time, the non-breaching party is entitled to receive $950,000 as liquidated damages.
- Right of First Offer: The Partnership holds a right of first offer on the Sellers' Wholesale Fuel Distribution Business for five years post-closing.
- Outlook: The filing does not provide specific forward-looking guidance on earnings or growth beyond the scheduled closing in the third quarter.
Investor Verification Checklist
- Verify the specific financial results for the quarter ended June 30, 2013, by reviewing the press release attached as Exhibit 99.1, as this filing does not contain the numerical data.
- Review the full Asset Purchase Agreement (Exhibit 2.1) to understand the specific definitions of "Inspection Defects" and the detailed conditions precedent to closing.
- Confirm the terms of the lease and fuel distribution agreements between the Partnership and LGO to assess the ongoing related-party nature of the operations.
- Monitor the closing status in the third quarter of 2013 to ensure the transaction is consummated and the $21.125 million consideration is funded.