DCC expands US presence with United Propane acquisition
DCC announced the expansion of its presence in the United States liquefied petroleum gas (LPG) market on Tuesday, with the acquisition of United Propane Gas.
The FTSE 100 company said that, together with a recent smaller bolt-on acquisition completed in Colorado, the combined enterprise value of the transactions was $145m (£106.82m).
It said consideration was paid in cash on completion from its own resources, adding that the acquisitions would be earnings enhancing from completion, with the after-tax cash payback set to be around nine years.
UPG was DCC LPG's largest acquisition since it initially entered the US market in April 2018, and followed the material bolt-on acquisitions of NES Group in September 2020 and Pacific Coast Energy in April 2019.
It was described as a “further significant step” in its strategy to build a business of scale in the “highly attractive and growing” US LPG market.
The board said the acquisition would considerably expand DCC LPG's geographic presence from 14 to 21 states and would almost double its customer base to more than 230,000 customers, with the combination set to create the sixth largest business in the fragmented US LPG market.
DCC said UPG markets, sells and delivers LPG and related products and services to residential, agricultural and commercial customers in 13 midwest and southern states, with a particularly strong presence in Kentucky, Tennessee and Alabama.
Based in Paducah, Kentucky, the business employs about 360 people, has more than 110,000 active customers, and sells around 120,000 tonnes of LPG annually from 80 operating locations.
Approximately two-thirds of annual volume were sold to residential customers, with the balance sold to agricultural and commercial customers.
UPG's operations were described as “well-invested”, and largely contiguous to DCC LPG's existing operations.
“The acquisition of UPG is another exciting development for DCC and is consistent with our ambition to build a substantial presence in the global LPG market,” said chief executive officer Donal Murphy.
“Since our initial entry into the US LPG market in April 2018 we have now committed approximately $445m of acquisition capital in building DCC Propane into the sixth largest business in the market.
“Building a business of scale in the US LPG market provides DCC with a strong platform to provide our customers with their energy needs now and into the future.”
Murphy said that, following the acquisition of UPG, DCC had a business of “real scale” with a presence in 21 states, employing more than 800 people and serving the energy needs of over 230,000 customers.
“Notwithstanding this growth, the opportunity for further expansion remains significant and UPG will further enhance our platform for development in the large, highly fragmented, and growing LPG market in the US.”