Ferrellgas Buys Western Petroleum Biz - Analyst Blog
April 04 2013 - 11:50AM
Zacks
Ferrellgas Partners
L.P. (FGP) announced the acquisition of the propane
operation of Western Petroleum for an undisclosed amount. The
partnership started the process of this acquisition from Aug 1,
2012.
Utah-based Western Petroleum engages in selling and transporting
diesel fuel, gasoline, kerosene, lubricants with multiple brands,
propane, and several kinds of chemicals including methanol and
washer fluid. It operates primarily in the Rocky Mountain and the
southern states, and the northern plains.
Prior to this acquisition, Ferrellgas Partners did not have a
strong existence in Utah, northwest Colo. and Wyo. For a long time,
the partnership has been targeting to expand its operations in this
territory. This acquisition provides Ferrellgas Partners an
opportunity to establish its first retail set-up in Utah.
This marks Ferrellgas Partners’ fifth acquisition in the current
fiscal year, taking the total tally to nearly 242 to date. The
partnership’s recent significant buys were N.Y.-based Mr. Bar-B-Q
in Mar 2013, Conn.-based IGS Propane in Dec 2012, El Paso-based
Flores Gas in Oct 2012 and Sacramento-based Capitol City Propane in
Sep 2012. These acquisitions will enable Ferrellgas Partners to
strengthen its presence in the state and add customers.
We know that Ferrellgas Partners follows a couple of rationale in
terms of its acquisition strategy, including acquiring an
organization having the same line of business and the take-over
should be immediately accretive. We believe the current acquisition
to be immediately accretive to the partnership, given Western
Petroleum’s presence in the region.
It is evident that Ferrellgas Partners strongly follows an
inorganic growth strategy to expand its domestic operation,
particularly in the Southwest and Northeast areas of the U.S. These
acquisitions are part of the partnership’s long-term strategy to
grow by an aggressive pursuit of well-run propane companies.
However, we believe that a highly competitive propane distribution
business environment, over-reliance on a few propane suppliers and
higher degree of competition from other energy sources may to some
extent challenge Ferrellgas Partners’ future performance.
Ferrellgas Partners currently has a Zacks Rank #3 (Hold). Besides
the partnership, the stocks of Calumet Specialty Products
Partners LP (CLMT) and NGL Energy Partners
LP (NGL) with a Zacks Rank #1 (Strong Buy), and
Delek US Holdings, Inc. (DK) with a Zacks Rank #2
(Buy) are worth considering.
CALUMET SPECLTY (CLMT): Free Stock Analysis Report
DELEK US HLDGS (DK): Free Stock Analysis Report
FERRELLGAS -LP (FGP): Free Stock Analysis Report
NGL ENERGY PART (NGL): Free Stock Analysis Report
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