Business Context and Reporting Period
This Form 8-K Current Report was filed by Lehigh Gas Partners LP (the "Partnership") on December 5, 2012, regarding events occurring on November 30, 2012. The filing discloses the entry into a Material Definitive Agreement to acquire assets related to a gasoline, diesel, and convenience store retail business.
Key Financial Metrics and Transaction Details
The filing details a specific asset acquisition rather than providing periodic financial statements (revenue, profit, or cash flow). Key transaction metrics include:
- Total Asset Purchase Price: $29,000,000 in cash ($28,500,000 to Sellers and $500,000 to Joseph Gentile, Jr.).
- Assets Acquired: 24 motor fuel service stations (23 fee simple interests, 1 leasehold interest) and related convenience store assets.
- Escrow Deposits: $250,000 initial deposit paid; an additional $250,000 second deposit required within three business days after the Due Diligence Period.
- Tax Escrow: $500,000 to be held at closing pending verification of pre-closing tax liabilities.
- Inventory Payment: Additional amounts to be paid for inventory as of the Closing date (specific amount not disclosed).
- Contingent Purchase Option: Option to purchase an additional property in Clarks Summit, PA, for $1,000,000, exercisable by Sellers prior to December 31, 2013.
Material Changes and Transaction Structure
The Partnership entered into an Asset Purchase Agreement with Dunmore Oil Company, Inc. and Jojo Oil Company, Inc. (the "Sellers"). Key structural elements include:
- Operational Assignment: Post-closing, the Retail Business and certain assets/liabilities will be assigned to Lehigh Gas – Ohio, LLC ("LGO"), an entity managed by the Partnership's CEO, Joseph V. Topper, Jr.
- Seller Continuation: Sellers may continue operations related to heating oil, propane, and unbranded motor fuels.
- Non-Compete: Joseph Gentile, Jr. agreed to a five-year non-compete agreement regarding the Retail Business and branded motor fuels.
- Exclusivity: Sellers agreed not to solicit third-party offers for the Assets until the earlier of Closing or one year from execution.
Guidance, Risks, and Contingencies
The filing outlines several conditions and risks associated with the transaction:
- Closing Date: Scheduled for on or before December 28, 2012, with a potential 15-day extension. If the Partnership seeks an extension beyond December 31, 2012, Sellers may terminate the agreement.
- Due Diligence: The Partnership has a 15-day period to conduct due diligence after receiving documents. The Partnership may terminate the agreement in its sole discretion if results are unacceptable.
- Title Deficiencies: If title deficiencies are discovered within 10 days of execution, the Partnership may exclude the affected property and reduce the purchase price.
- Deposit Forfeiture: If the Partnership terminates without cause, the First Deposit is forfeited to Sellers. If the Partnership breaches obligations, both deposits are forfeited.
Investor Verification Checklist
- Verify the final closing date and whether the December 28, 2012 deadline was met or extended.
- Confirm the outcome of the Due Diligence Period and whether any assets were excluded due to title deficiencies.
- Monitor the status of the $500,000 tax escrow and the final inventory valuation payment.
- Check if the Sellers exercised the option to sell the Additional Property in Clarks Summit, PA, for $1,000,000.
- Review subsequent filings to confirm the operational integration of the assets into Lehigh Gas – Ohio, LLC.