UGI acquires AmeriGas common units, consolidates ownership

April 4, 2019 By    

UGI Corp. agreed to acquire 69.2 million publicly held AmeriGas common units previously not owned, consolidating its ownership of AmeriGas.

As part of the transaction, AmeriGas will no longer be a Master Limited Partnership (MLP) and will become a wholly owned subsidiary of UGI.

“Our two companies have a long and successful history of working together, spanning 60 years,” says John L. Walsh, president and CEO of UGI. “A consolidation of AmeriGas’ ownership maximizes value for both companies and our respective stakeholders, as we will be better positioned to invest and grow. In particular, we welcome AmeriGas’ current unit holders and look forward to being exceptional stewards of their capital.”

UGI currently holds an approximate 26 percent ownership interest in AmeriGas. AmeriGas Propane Inc., a wholly owned UGI subsidiary, has served as AmeriGas’ sole general partner since 1995.

According to UGI, the transaction is expected to increase UGI’s cash flow per share by more than 15 percent for fiscal year 2020 on a fully consolidated basis; provide over $200 million in additional annual cash flow, increasing UGI’s capability to make diversified investments across all business segments to further its growth strategy; and support the increase of UGI’s annualized dividend to its shareholders by $0.16 for the July dividend and another $0.10 following the transaction’s close.

The deal supports the paydown of AmeriGas’ short-term debt as a means of reducing leverage resulting in an enhanced credit profile, eliminates administrative complexities and costs inherent to the MLP structure, and resolves distribution coverage challenges.

“After conducting a comprehensive review of strategic alternatives, both the AmeriGas and UGI Boards determined that a merger of AmeriGas was the most compelling next step in our development,” says Hugh J. Gallagher, president and CEO of AmeriGas. “The transaction with UGI supports a strong and stable AmeriGas and empowers a focus on growth opportunities.”

Under the terms of the agreement, AmeriGas unit holders will receive 0.50 shares of UGI common stock plus $7.63 in cash consideration for each common unit of AmeriGas. AmeriGas unit holders will continue to receive a $0.95 per unit distribution for each quarter completed prior to the closing of the merger.

The closing of the merger is subject to satisfaction of customary conditions but is expected to occur in the fourth quarter of fiscal 2019.

“We are pleased to increase our ownership of AmeriGas,” Walsh says. “This merger offers a compelling premium for AmeriGas unit holders and creates a platform for future cash flow and earnings growth for UGI. Our dividend increases represent our confidence in that future outlook.”

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Joe McCarthy was an associate editor at LP Gas Magazine.

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