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MLP IPOs Paddle Further Downstream

By Peter Staas on Dec. 22, 2012

Lehigh Gas Partners’ predecessor grew its portfolio of 182 service stations from 11 locations in 2004, following the lead of a number of smaller operators that in the mid- to late 2000s took advantage of the major integrated oil companies’ exodus from retail fuel operations in favor of business lines that offered superior returns. Regional players have emerged in this vacuum, building a presence in major metropolitan areas that were formerly the province of the Super Oils.

Over the past three years, the company purchased 24 Ohio Uni-Mart locations for $12.1 million, 85 sites in Ohio and Kentucky from BP (LSE: BP, NYSE: BP), and 26 service stations from Motiva Enterprises. Trade publication Convenience Store News estimates that 76 percent of operators own 50 stores or less, providing ample opportunity for Lehigh Gas Partners and other ambitious operators to consolidate. The more stores that Lehigh Gas Partners acquires or leases, the more revenue it will generate from rents and fuel distribution.

Roughly three weeks after its IPO, Lehigh Gas Partners announced an initial agreement to acquire 24 retail stations and related assets from Dunmore Oil Company and Jojo Oil Company that will be leased to LGO. And in a conference call to discuss pro forma third-quarter results, CEO Joseph Topper Jr. indicated that a number of operators had contacted the firm about potential acquisitions and that the management team was working on two transactions that would likely be announced in the first or second quarter of 2013.

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