FUEL PRODUCTS DISTRIBUTION INSIGHT - Raymond James
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Investment Banking Fall 2020
IN THIS ISSUE
FUEL PRODUCTS DISTRIBUTION INSIGHT Recent, Notable M&A Transactions
Macroeconomic Indicators
MERGERS & ACQUISITIONS, PUBLIC & PRIVATE CAPITAL Debt and Equity Market Conditions
AND FINANCIAL ADVISORY SERVICES
What We’re Reading
FOR INSTITUTIONAL USE ONLY
FUEL PRODUCTS DISTRIBUTION INSIGHT Fall 2020
Deal spotlight
ThompsonGas LLC acquires Midwestern Propane Gas Co. Superior Plus Corp. acquired Champagne’s Energy, Inc. and
and EnergyUnited Propane Rymes Propane & Oil Inc.
• Announced: August 11, 2020 & September 23, 2020, respectively • Closed: August 3, 2020 & September 1, 2020, respectively
• Rationale: Continues consolidation strategy; eight acquisitions • Rationale: Champagne scales existing Maine footprint; Rymes expands New
completed in 2020 alone. Both acquisitions expand and complement Hampshire/New England markets of operation; investment from Brookfield
the Company’s existing geographic footprint Asset Management Inc. (June 2020) has enhanced ability to accelerate
• Midwestern Propane Co.: Family owned and operated business est. Superior’s retail propane acquisition strategy
in 1936 and headquartered in East Belleville, IL; serves approximately • Target: Champagne’s is a family owned propane distributor founded in 1981
5,000 residential and commercial customers in Illinois and Missouri delivering approximately 11 million gallons of propane and distillates
• EnergyUnited Propane: Wholly-owned propane distribution annually to retail and commercial customers in Maine. Rymes is a New
subsidiary of Electric Membership Corporation. Serves ~29,000 Hampshire based retail propane and heating oil distributor serving ~88,000
residential and commercial customers throughout 104 counties in residential and commercial customers in New Hampshire, Maine,
North Carolina, South Carolina, and Virginia Massachusetts, and Vermont. Purchase price was $159 million representing
8.0x 2019 EBITDA; post-synergies the multiple is expected to be 5.9x
Wellspring Capital Management acquires Cadence RelaDyne acquires Nick Barbieri Trucking, LLC
Petroleum Group
• Closed: October 8, 2020 • Closed: September 9, 2020
• Rationale: Wellspring has experience in the fuel distribution space • Rationale: Acquisition will expand the RelaDyne footprint into California
having acquired Stripes Holdings, LLC in 2005. Cadence will serve as and strengthen its Western region operations; aligning with its mission to
a standalone platform and with Wellspring’s financial backing, will build a national footprint spanning border-to-border and coast-to-coast
continue to consolidate a highly fragmented industry as well as act
on organic growth initiatives • Target: Founded in 1944 and headquartered in Santa Rosa, CA; the
• Target: Formed in 2018 through the combination of five leading Company is a full-service oil, lubricant, and gasoline and diesel fuel
lubricant, fuel, and DEF distributors - Cadence is a family of lubricant distributor as well as a cardlock operator serving Northern California.
and fuel distributors serving a variety of end markets across the
eastern and central U.S.
2FUEL PRODUCTS DISTRIBUTION INSIGHT Fall 2020
Notable M&A transactions this year
Announced
Date Acquiror Target Target Description
Wellspring Capital Formed in 2018 through the combination of five leading lubricant, fuel, and DEF distributors - Cadence is a family of lubricant and fuel
10/8/2020 Cadence Petroleum Group
Management distributors serving a variety of end markets across the eastern and central U.S.
Headquartered in Omaha, NE and founded in 1922, Warren Distribution is one of the largest private label blenders and independent motor
10/8/2020 Pritzker Private Capital Warren Distribution, Inc.
oil, lubricants, and automotive chemicals manufacturers and suppliers in North America with customers in over 30 countries.
9/29/2020 Energy North Group Putnam Fuel Established in the 1930's, Putnam is a Goffstown, New Hampshire-based fuel distributor and HVAC service provider.
EnergyUnited Propane is a wholly-owned propane distribution subsidiary of Electric Membership Corporation. Serves ~29,000 residential
9/23/2020 ThompsonGas LLC EnergyUnited Propane
and commercial customers throughout 104 counties in North Carolina, South Carolina, and Virginia.
Established in 1959, Manlius Oil is a family-owned fuel and propane distributor and convenience store operator serving residential,
9/16/2020 Growmark Inc. Manlius Oil Company, Inc.
commercial, and agricultural accounts in Illinois.
Founded in 1944 and headquartered in Santa Rosa, CA; the Company is a full-service oil, lubricant, and gasoline and diesel fuel distributor
9/9/2020 RelaDyne Nick Barbieri Trucking, LLC
as well as a cardlock operator serving Northern California.
Rymes is an independent family-owned and operated retail propane and heating oil distributor servicing ~88,000 residential and
8/25/2020 Superior Plus Corp. Rymes Propane & Oil, Inc. commercial customers primarily in New Hampshire, Maine, Massachusetts, and Vermont. Acquisition was completed for $159 million and
includes 46 operating locations, ~3 million gallons of storage capacity, a fleet of 350 vehicles, and ~370 employees.
Branded wholesale fuel supply
8/11/2020 U.S. Oil Co., Inc. businesses of Sasafrasnet, LLC Acquired 45 branded dealers including Mobil- and BP-branded locations.
and Esquire Petroleum, LLC
Midwestern Propane Gas Company is a family-owned independent propane retailer serving approximately 5,000 residential and
8/11/2020 ThompsonGas LLC Midwestern Propane Gas Co.
commercial customers throughout Illinois and Missouri.
Founded in 1981, Champagne is an independent propane retailer that delivers ~11 million gallons of propane and distillates annually to
7/28/2020 Superior Plus Corp. Champagne's Energy, Inc.
retail and commercial customers throughout Maine.
Source: Public company filings, press releases and Capital IQ.
3FUEL PRODUCTS DISTRIBUTION INSIGHT Fall 2020
Notable M&A transactions this year (cont’d)
Announced
Date Acquiror Target Target Description
Lube-Tech Since 1925, Lube-Tech has provided energy, fluids, lubricants, and vehicle wash solutions to customers across the Midwest within the
7/9/2020 Mansfield Energy Corp.
(fuel distribution assets) automotive, industrial and manufacturing segments as well as private label fluids and lubricants to OEMs.
Roberts Energy, LLC
Nouria Energy Based in Springfield, Massachusetts Roberts Energy is a supplier of motor fuels and heating fuels to commercial end-users and wholesale
6/25/2020 (branded fuel distribution
Corporation customers and has been in operation for over 90 years.
business)
U.S. Venture Inc. Southwest Transport Co. Southwest Transport Co. is a Martin Eagle affiliate that transports and distributes fuels to customers of Martin Eagle as well as to other
4/21/2020
(d.b.a. U.S. Oil) (Martin Eagle) third-party customers primarily in and around the Dallas-Fort Worth metroplex and north central Texas.
Davison is headquartered in Mobile, Alabama and is one of the largest distributors of fuels, lubricants, DEF products, and related petroleum
3/11/20 Cadence Petroleum Davison Fuels & Oil products throughout the Southeast. Davison also is one of the largest marketers of fleet card management products with its Fuel Masters
Fleet Card.
3/3/20 PetroCard, Inc. Masco Petroleum, Inc. Family-owned fuel and lubricant distributor serving Western Washington since 1999 from its headquarters in Aberdeen, Washington.
Retail Fuel Distribution
Family-owned fuel and lubricant distributor based in Birmingham, Alabama; distributes Mobil-branded lubricants and fuel for major brands
2/5/20 Majors Management, LLC Business of The McPherson
to dealers in Alabama, Arkansas, Georgia, Mississippi, Florida, Tennessee and Louisiana. Acquisition included 185 dealer supply contracts.
Companies, Inc.
Fuel Distribution Business &
An independently owned and operated wholesale distributor of branded (Gulf, CITGO, and Sunoco) and unbranded gasoline and diesel fuel
1/27/20 Stewart's Shops Corp. Five Gas Stations of Polsinello
to commercial, construction, and agricultural end markets in New York.
Fuels, Inc.
Commercial Distributing, Inc.
1/16/20 PetroChoice Operates as a distributor of lubricants in Oklahoma, Texas and Arkansas and specializes in the automotive market.
(CDi)
Based in Salt Lake City, Utah, operates as a regional retail dealer and commercial fuel business serving Utah, Idaho and Wyoming; purchase
1/16/20 Parkland Fuel Corp. Kellerstrass Oil
included an 84-site dealer business and trucking & distribution assets.
O'Rourke Distribution Co., Marine Fuel Distribution Assets A subsidiary of Brenntag North America, Inc. and headquartered in Houston, TX, J.A.M. is a physical supplier of marine fuels and lubricants
1/7/20 Inc. of J.A.M. Distributing Company, since 1982 and is active in Houston, Galveston, Texas City, Beaumont, Port Arthur, Freeport, TX and Lake Charles, LA serving major shipping
(Mansfield Energy) LLC lines, dredging companies, offshore drilling & exploration, seismic, marine construction and the inland towing industry.
Source: Public company filings, press releases and Capital IQ.
4FUEL PRODUCTS DISTRIBUTION INSIGHT Fall 2020
Macroeconomic indicators
Real GDP Growth Weekly Jobless Claims
(seasonally adjusted annual rates) (in millions)
10.0% 2.3% 2.2% 3.2% 3.5% 2.5% 3.5% 2.9% 1.1% 3.1% 2.0% 2.1% 2.1% 8.0
0.0% 6.0
Weekly unemployment claims have Week Ended
(10.0%) (5.0%) 9/26/20
4.0 steadily decreased from their peak in
(20.0%) April but remain elevated 0.84
(30.0%) 2.0
(40.0%) (31.4%) 0.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20
'17 '17 '17 '17 '18 '18 '18 '18 '19 '19 '19 '19 '20 '20
Consumer Spending Growth Purchasing Managers Index
(Real PCE % change, seasonally adjusted at annual rates) (annual rate)
10.0% 2.4% 2.4% 2.4% 4.6% 1.7% 4.0% 3.5% 1.4% 1.1% 4.6% 3.2% 1.8% 65.0
0.0% September 2020
60.0
55.4
(10.0%) (6.9%) 55.0
(20.0%) 50.0
(30.0%) Industrial production has risen
45.0 33.5% since its April low of 41.5
(40.0%) (33.2%)
40.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Sep-17 Jan-18 May-18 Sep-18 Jan-19 May-19 Sep-19 Jan-20 May-20 Sep-20
'17 '17 '17 '17 '18 '18 '18 '18 '19 '19 '19 '19 '20 '20 Note: PMI Index figures above 50 indicate expansion
Source: Bureau of Economic Analysis, St. Louis Federal Reserve, Bureau of Labor Statistics, Institute for Supply Management and Capital IQ.
All data as of 10/9/20.
5FUEL PRODUCTS DISTRIBUTION INSIGHT Fall 2020
Macroeconomic indicators (cont’d)
West Texas Intermediate Inflation vs. 10-Year Treasury
($ per barrel)
$100
3.5%
$80
3.0%
$60 10/5/20
$39.12 2.5%
$40
2.0% August 2020
$20 1.3%
1.5%
$0 1.0%
($20) 0.5%
10/5/20
($40) 0.0% 0.78%
Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 Apr-20 Oct-20 Oct-16 Apr-17 Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 Apr-20 Oct-20
Inflation (CPI) 10-Year U.S. Treasury Yield
Source: Bureau of Economic Analysis, St. Louis Federal Reserve, Bureau of Labor Statistics, Institute for Supply Management and Capital IQ.
All data as of 10/7/20.
6FUEL PRODUCTS DISTRIBUTION INSIGHT Fall 2020
Public company share price performance
10-Year fuel distributor historical trading multiples (EV/EBITDA)(1)
16.0x
14.3x
13.7x 13.6x 13.5x
14.0x 13.3x 13.1x
11.9x Median: 11.3x
12.0x 11.5x 12.0x
11.9x
10.0x 10.7x
10.3x 10.5x 10/7/20
9.8x 9.9x
9.4x 8.5x
7.9x
8.0x
6.0x
6.2x
4.0x
9/1/10 8/1/11 7/1/12 6/1/13 5/1/14 4/1/15 3/1/16 2/1/17 1/1/18 12/1/18 11/1/19 10/1/20
Source: Capital IQ; data as of 10/7/20.
(1) Median EV/LTM EBITDA multiple for PKI, SUN, GLP, CAPL, INT, SPB, UGI, SPH, SGU, and SRLP.
7FUEL PRODUCTS DISTRIBUTION INSIGHT Fall 2020
Public company share price performance
Fuel distributor trailing three-year stock price performance
220.0
180.0
Indexed Share Price Performance
+51.4%
(10/6/2017 = 100.0)
140.0 +31.8%
+15.8%
+9.1%
+6.9%
100.0 +1.5%
(7.3%)
(11.3%)
(20.1%)
(20.8%)
60.0 (34.7%)
(61.5%)
20.0
Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20
Source: Capital IQ; share price as of 10/6/20.
8FUEL PRODUCTS DISTRIBUTION INSIGHT Fall 2020
Public company trading statistics
Current Price as a % of LTM High LTM Dividend / Distribution Yield
100.0% 96.2% 91.9% 25%
83.2% Median: 71.6%
76.7% 20% 17.1%
80.0% 72.4% 70.8% 69.2% 68.8%
15% 13.8% 13.8% 13.4%
65.6% 12.4%
60.0% Median: 9.1%
50.8% 10%
5.9% 5.4% 3.8%
40.0% 5% 3.4%
1.8%
20.0% 0%
SGU SPB SRLP CAPL SUN PKI SPH UGI GLP INT SRLP CAPL GLP SUN SPH SPB SGU UGI PKI INT
EV / LTM EBITDA EV / 2020E EBITDA
12.0x 12.0x 11.3x
9.7x 9.2x 9.8x 9.4x 9.1x 9.0x Median: 9.0x
10.0x 8.6x 8.5x 8.3x 8.3x 10.0x
Median: 8.3x
8.0x 6.9x 8.0x 7.9x 7.7x 7.6x 6.8x
6.0x 5.1x 5.0x 6.0x
3.9x
4.0x 4.0x
2.0x 2.0x
n/a
0.0x 0.0x
SUN CAPL PKI SPH UGI SRLP SPB GLP INT SGU CAPL PKI SPH UGI SRLP SPB SUN GLP INT SGU
Motor Fuel Distributor
Propane / Heating Oil Distributor
Source: Public company filings, Capital IQ, Wall Street equity research.
Note: Share prices current as of 10/6/20. SUN = Sunoco LP, CAPL = CrossAmerica Partners LP, GLP = Global Partners LP, PKI = Parkland Fuel Corp., INT = World Fuel
Services Corp., SRLP = Sprague Resources LP, SPH = Suburban Propane Partners, UGI = UGI Corp., Star Group LP = SGU, and SPB = Superior Plus Corp. 9FUEL PRODUCTS DISTRIBUTION INSIGHT Fall 2020
Public company trading statistics (cont’d)
Net Debt / EBITDA 2020 Estimated Annual EBITDA Growth
8.0x 50.0%
40.0%
6.2x 29.8%
6.0x 5.4x 5.4x 30.0%
4.8x
20.0%
4.0x Median: 3.9x 10.8% 9.5%
4.0x 3.8x 10.0%
3.4x 3.2x 2.5% 1.6% Median: 1.6% n/a
0.0%
2.0x 1.5x (10.0%)
1.1x (10.1%) (10.9%)
(20.0%)
0.0x (30.0%) (22.7%) (23.0%)
SUN CAPL SRLP SPH UGI GLP PKI SPB INT SGU CAPL UGI GLP SRLP SUN SPH SPB PKI INT SGU
Motor Fuel Distributor
Propane / Heating Oil Distributor
Source: Public company filings, Capital IQ, Wall Street equity research.
Note: Share prices current as of 10/6/20. SUN = Sunoco LP, CAPL = CrossAmerica Partners LP, GLP = Global Partners LP, PKI = Parkland Fuel Corp., INT = World Fuel
Services Corp., SRLP = Sprague Resources LP, SPH = Suburban Propane Partners, UGI = UGI Corp., Star Group LP = SGU, and SPB = Superior Plus Corp. 10FUEL PRODUCTS DISTRIBUTION INSIGHT Fall 2020
Debt market outlook
Leveraged Finance Volume ($BN)
160.0
120.0
80.0
40.0
0.0
Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 MTD
(1)
Pro Rata Institutional High-Yield Oct-20
S&P LCD LEVERAGE LOAN 100 INDEX YTM Non-Investment Grade Bond Yields
15.0% 10.0%
9.0%
10.0% 8.0%
10/6/20
7.0%
4.93%
5.0% 6.0%
5.0%
0.0% 4.0%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
Oct-19 Jan-20 Apr-20 Jul-20 Oct-20
'17 '17 '17 '17 '18 '18 '18 '18 '19 '19 '19 '19 '20 '20
Yield To Maturity BAML High Yield Index
Source: LCD Research.
(1) As of 10/2/20.
11FUEL PRODUCTS DISTRIBUTION INSIGHT Fall 2020
Debt market outlook (cont’d)
Middle Market Leverage Trends(1)
Average Leverage Ratio Average LBO Equity Contribution
6.0x 5.6x 55%
5.4x 5.3x
5.5x 5.1x
5.0x 4.9x 4.9x
5.0x 4.8x 50%
4.5x
4.0x 45%
3.5x
3.0x 40%
2.5x
2.0x 35%
2013 2014 2015 2016 2017 2018 2019 LTM 2Q20 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: LCD Research.
(1) Middle market defined as companies with less than $50 million in EBITDA. All data as of 10/2/20.
12“Cooling Demand Recovery Keeps Oil Stuck Around $40” “Contraction Continues in Oil and Gas Sector but Pace of
| Amrith Ramkumar, WSJ decline Has Moderated” | Dallas Fed Energy Survey
September 29, 2020 – The surge in demand seen from April to June September 23, 2020 – Both the business activity index and the index
appears to have dwindled with demand remaining fairly flat in the U.S. for capital expenditures for E&P firms remained in negative territory in
for most of the third quarter. Analysts say that prices are still too low Q3 but are substantially up from their Q2 lows. Most executives – 66%
for producers to profitably extract oil, and while the U.S. steadily – said they believe U.S. oil production has peaked.
increases output – demand from critical end-markets, such as “Read More”
aviation, remain low with no near-term growth expectations.
“Read More”
“Hurricanes and Their Effects on Fuel Supply” | Jim “Oil Market Report – September 2020” | IEA
Forester and Brian Milne, NACS September 9, 2020 – The oil market remains very fragile as the
What we’re September 28, 2020 – Despite a historically active hurricane season,
fuel supply has not suffered as much as one might expect largely due
uncertainty created by COVID-19 shows little sign of abating. A
resurgence in COVID-19 cases in many countries, local lockdown
reading to suppressed demand resulting from COVID-19. measures, continued teleworking, and the weak aviation sector led to
downward revisions of demand estimates for 3Q20 and 4Q20 by 0.1
“Read More”
mb/d and 0.6 mb/d, respectively.
“Read More”
“California to Phase Out Sales of New Gas-Powered Cars
by 2035” | Dino Grandoni, Faiz Siddiqui, and Brady
Dennis, Washington Post
September 23, 2020 – CA Governor Gavin Newsom signed an
executive order creating new regulations that ensure every new
passenger car and truck sold in CA is electric or otherwise “zero-
emissions” by 2035. Manufacturers of medium- and heavy-duty
vehicles have until 2045 to make them zero-emissions, when feasible.
CA is the world’s fifth-largest economy and its largest source of
emissions is the transportation sector.
“Read More”
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the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of
information regarding any website's users and/or members. 13Your success is Learn how our deep industry expertise and commitment to each transaction can help you achieve your
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Deep and Client focus Representative
SCOTT GARFINKEL experienced team transactions
6 +4
Managing Director & Group Head Propane and
Nashville Office Convenience Heating Oil
Retail
615.645.6796
scott.garfinkel@raymondjames.com
investment equity Marketers
bankers research Has acquired propane
analysts
distribution and propane
ROGER WOODMAN Truck Stop &
+4
Has been acquired by terminal assets from
Managing Director Travel Center Terminal
Operators Operators
Atlanta Office
404.240.6864
dedicated equity July 2020 December 2018
roger.woodman@raymondjames.com capital markets pros
JOHN VEITH Robust transaction Oil Jobbers / Merchandise/
Director
experience(1) Wholesale Fuel Foodservice Has sold its convenience Has been acquired by
store and fuel distribution
Nashville Office Distributors Distributors assets to
615.645.6799
john.veith@raymondjames.com +70 $10B October 2018
$289,000,000
November 2018
relevant total deal Commercial Mobile
This material is not to be considered an offer or solicitation regarding the sale of
any security. This material was prepared within Raymond James & Associates’
industry value Fuel & Lube Refueling
Investment Banking Department and is for information purposes only. This transactions Distributors
Has sold its fuel
material is not a product of Raymond James & Associates’ Research Department;
+20
distribution assets to
Has sold its wholesale fuel and
recipients of this report should not interpret the information herein as sufficient refined fuel terminal assets to
grounds for an investment decision or any other decision. The report shall not Alternative Fuel Carwash
constitute an offer to sell or the solicitation of an offer to buy any of the securities years focused Providers Operators
mentioned herein; past performance does not guarantee future results.
Information contained in this report was received from sources believed to be
on the industry April 2018 September 2017
reliable, but accuracy is not guaranteed.
Raymond James & Associates, Inc., member of New York Stock Exchange / SIPC (1) As of 10/9/20.
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