Proposed acquisition of third party common
units follows comprehensive strategic review of AmeriGas
Transaction beneficial to both
companies
Unitholders of AmeriGas to receive cash and
stock consideration representing a premium of 13.5% to AmeriGas’
current trading price
UGI announces cumulative 25% dividend
increase
UGI and AmeriGas update fiscal 2019
guidance
UGI Corporation (NYSE: UGI) and AmeriGas Partners, L.P. (NYSE:
APU; “AmeriGas”) announced today that they have entered into a
merger agreement under which UGI will fully consolidate its
ownership of AmeriGas, the nation’s largest retail propane
marketer, by acquiring the 69.2 million publicly held common units
it does not already own. Under the terms of the agreement, AmeriGas
unitholders will receive 0.50 shares of UGI common stock plus $7.63
in cash consideration for each common unit of AmeriGas,
representing a premium of 21.9% to AmeriGas’ 30-day volume weighted
average price and a 13.5% premium to the April 1, 2019 closing
price of $31.13. AmeriGas unitholders will continue to receive a
$0.95 per unit distribution for each quarter completed prior to the
closing of the merger.
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As part of the transaction, AmeriGas will no longer be a Master
Limited Partnership (“MLP”) and will instead become a wholly owned
subsidiary of UGI. UGI currently holds an approximate 26% ownership
interest in AmeriGas. AmeriGas Propane, Inc., a wholly owned UGI
subsidiary, has served as AmeriGas’ sole general partner since 1995
(the “General Partner”).
The General Partner’s Audit Committee, comprised entirely of
independent directors, after consultation with its independent
legal and financial advisors, unanimously approved the merger
agreement and determined it to be fair and reasonable to, and in
the best interests of, AmeriGas and the unitholders unaffiliated
with UGI. Subsequently, the transaction was approved by the Boards
of both UGI and the General Partner.
“Our two companies have a long and successful history of working
together, spanning 60 years,” said John L. Walsh, President and
Chief Executive Officer 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 unitholders and look
forward to being exceptional stewards of their capital.”
The closing of the merger is subject to satisfaction of
customary conditions. Under the partnership agreement, the merger
is required to be approved by a majority of the outstanding
AmeriGas common units. Affiliates of UGI own approximately 26% of
the outstanding common units and have entered into a support
agreement with AmeriGas whereby they have agreed to vote their
common units in favor of the transaction.
Compelling Financial and Strategic Benefits
The transaction offers compelling financial and strategic
benefits for both UGI and AmeriGas in the near and long term.
For UGI, the transaction is expected
to:
- Increase UGI’s cash flow per share by
over 15% for fiscal 2020 on a fully consolidated basis.
- Provide over $200 million in additional
annual cash flow, increasing its capability to make diversified
investments across all business segments to further the company’s
growth strategy.
- 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.
- Be accretive to Adjusted EPS beginning
in fiscal 2020.
For AmeriGas and its current investors,
the transaction is expected to:
- Provide unitholders an immediate 13.5%
premium to the value of their units.
- Improve AmeriGas’ cost of capital
through the elimination of incentive distribution rights payable to
the General Partner and support the long-term strength and
stability of AmeriGas.
- Enable unitholders to share in the
value of UGI, which has a diversified asset portfolio and a history
of meeting long-term commitments to shareholders including 6% - 10%
annual earnings growth and 4% annual dividend growth.
- Support the paydown of AmeriGas’
short-term debt as a means of reducing leverage resulting in an
enhanced credit profile.
- Eliminate administrative complexities
and costs inherent to the MLP structure and resolve 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. The transaction with UGI supports a strong and stable
AmeriGas and empowers a focus on growth opportunities,” said Hugh
J. Gallagher, President and Chief Executive Officer of
AmeriGas.
Roger Perreault, Executive Vice President, Global LPG, added,
“This transaction provides an opportunity to further align AmeriGas
and UGI International’s LPG distribution operations to drive
efficiencies, support strategic initiatives, and accelerate growth.
Additionally, AmeriGas unitholders will share in the value of a
company with an outstanding track record of enhancing shareholder
value.”
John L. Walsh concluded, “We are pleased to increase our
ownership of AmeriGas. This merger offers a compelling premium for
AmeriGas unitholders and creates a platform for future cash flow
and earnings growth for UGI. Our dividend increases represent our
confidence in that future outlook.”
Guidance Update1
As the heating season concludes, UGI is updating its fiscal 2019
adjusted EPS guidance to $2.40 - $2.60 from $2.75 - $2.95, due to
significantly warmer-than-normal winter weather in its European
markets, as well as the impact of limited weather volatility during
the fiscal 2019 heating season on its capacity management business.
This updated guidance excludes the impact of the proposed merger
described above.
AmeriGas expects to be at the low end of its fiscal 2019
Adjusted EBITDA guidance range of $610mm - $650mm due in large part
to unfavorable weather patterns in the Southern U.S. during January
and February.
Dividend Increase
UGI plans to increase its second fiscal quarter dividend by 15%
(an increase from $0.26 to $0.30) and an additional 10% (an
increase from $0.30 to $0.325) following the closing of the
transaction.
Financing
UGI, which does not currently have debt at the corporate level,
plans to finance the cash portion of the transaction by entering
into a bank term loan of approximately $500 million. The merger is
not, however, subject to any financing condition.
Closing Details
This transaction is subject to the approval of AmeriGas’
unitholders, as well as the satisfaction of customary closing
conditions. The transaction is expected to close in the fourth
quarter of fiscal 2019.
Advisors
J.P. Morgan Securities LLC is serving as UGI’s financial advisor
and Latham & Watkins LLP is serving as legal counsel.
Tudor, Pickering, Holt & Co. is serving as financial advisor
to AmeriGas’ Audit Committee. Potter Anderson & Corroon LLP is
serving as legal counsel to AmeriGas’ Audit Committee and Baker
Botts L.L.P. is serving as legal counsel to AmeriGas.
In connection with the transaction, the financial advisors
provided fairness opinions to both UGI’s Board and AmeriGas’ Audit
Committee. The fairness opinions referred to herein are, in each
case, subject to certain assumptions made, matters considered,
procedures followed, and other qualifications and limitations
described in such opinions.
Investment Community Call
UGI and AmeriGas will hold a live Internet Audio Webcast of its
conference call to discuss the proposed merger of AmeriGas at 9:00
AM ET on Tuesday, April 2, 2019. Interested parties may listen to
the audio webcast both live and in replay on the Internet
at http://www.ugicorp.com/investor-relations/events-and-presentations/default.aspx
or at the company website at http://www.ugicorp.com under
Investor Relations. A telephonic replay will be available from
12:00 PM ET on April 2, 2019 through 11:59 PM ET on April 9, 2019.
The replay may be accessed at (800) 585-8367, and internationally
at (416) 621-4642, conference ID 8689186.
About UGI Corporation
UGI Corporation is a distributor and marketer of energy
products and services. Through subsidiaries, UGI operates natural
gas and electric utilities in Pennsylvania, distributes
propane both domestically and internationally, manages midstream
energy and electric generation assets in Pennsylvania, and
engages in energy marketing in ten states, the District of
Columbia and internationally in France, Belgium, the
Netherlands and the UK. UGI, through subsidiaries, is the
sole general partner and owns approximately 26% of AmeriGas,
the nation's largest retail propane distributor.
About AmeriGas Partners, L.P.
AmeriGas Partners, L.P. is the nation’s largest retail propane
marketer, serving over 1.7 million customers in all 50 states from
approximately 1,900 distribution locations. UGI, through
subsidiaries, is currently the sole general partner and owns
approximately 26% of AmeriGas, with the public owning the remaining
74%. Comprehensive information about AmeriGas is available on the
Internet at http://www.amerigas.com.
USE OF NON-GAAP MEASURES
UGI
Management uses "adjusted diluted earnings per share," which is
derived from "adjusted net income attributable to UGI Corporation,"
both of which are non-GAAP financial measures, when evaluating
UGI's overall performance. For the periods presented, adjusted net
income attributable to UGI Corporation is net income attributable
to UGI Corporation after excluding net after-tax gains and losses
on commodity and certain foreign currency derivative instruments
not associated with current-period transactions (principally
comprising changes in unrealized gains and losses on such
derivative instruments), losses associated with extinguishments of
debt, and the impact on net deferred tax liabilities from a change
in the French tax rate and U.S. tax reform legislation. Volatility
in net income at UGI can occur as a result of gains and losses on
commodity and certain foreign currency derivative instruments not
associated with current-period transactions but included in
earnings in accordance with U.S. generally accepted accounting
principles ("GAAP").
Non-GAAP financial measures are not in accordance with, or an
alternative to, GAAP and should be considered in addition to, and
not as a substitute for, the comparable GAAP measures. Management
believes that these non-GAAP measures provide meaningful
information to investors about UGI’s performance because they
eliminate the impact of (1) gains and losses on commodity and
certain foreign currency derivative instruments not associated with
current-period transactions and (2) other significant discrete
items that can affect the comparison of period-over-period
results.
AmeriGas
AmeriGas’ management uses certain non-GAAP financial measures,
including adjusted total margin, EBITDA, adjusted EBITDA and
adjusted net income (loss) attributable to AmeriGas Partners, L.P.,
when evaluating AmeriGas’ overall performance. These financial
measures are not in accordance with, or an alternative to, GAAP and
should be considered in addition to, and not as a substitute for,
the comparable GAAP measures.
Management believes earnings before interest, income taxes,
depreciation and amortization (“EBITDA”), as adjusted for the
effects of gains and losses on commodity derivative instruments not
associated with current-period transactions and other gains and
losses that competitors do not necessarily have ("Adjusted
EBITDA"), is a meaningful non-GAAP financial measure used by
investors to (1) compare AmeriGas’ operating performance with that
of other companies within the propane industry and (2) assess
AmeriGas’ ability to meet loan covenants. AmeriGas’ definition of
Adjusted EBITDA may be different from those used by other
companies.
Management uses Adjusted EBITDA to compare year-over-year
profitability of the business without regard to capital structure
as well as to compare the relative performance of AmeriGas to that
of other MLPs without regard to their financing methods, capital
structure, income taxes, the effects of gains and losses on
commodity derivative instruments not associated with current-period
transactions or historical cost basis. In view of the omission of
interest, income taxes, depreciation and amortization, gains and
losses on commodity derivative instruments not associated with
current-period transactions and other gains and losses that
competitors do not necessarily have from adjusted EBITDA,
management also assesses the profitability of the business by
comparing net income attributable to AmeriGas Partners, L.P. for
the relevant periods. Management also uses Adjusted EBITDA to
assess AmeriGas’ profitability because its parent, UGI, uses
AmeriGas’ Adjusted EBITDA to assess the profitability of AmeriGas,
which is one of UGI’s industry segments. UGI discloses AmeriGas’
Adjusted EBITDA as the profitability measure for its domestic
propane segment.
Management believes the presentation of other non-GAAP financial
measures, comprised of adjusted total margin and adjusted net
income (loss) attributable to AmeriGas Partners, L.P., provide
useful information to investors to more effectively evaluate the
period-over-period results of operations of the Partnership.
Management uses these non-GAAP financial measures because they
eliminate the impact of (1) gains and losses on commodity
derivative instruments that are not associated with current-period
transactions and (2) other gains and losses that competitors do not
necessarily have to provide insight into the comparison of
period-over-period profitability to that of other master limited
partnerships.
A Note on Guidance1
UGI
Because UGI is unable to predict certain potentially material
items affecting diluted earnings per share on a GAAP basis,
principally mark-to-market gains and losses on commodity and
certain foreign currency derivative instruments and impacts from
tax reform in the U.S. and France, UGI cannot reconcile 2019
adjusted earnings per share guidance, a non-GAAP measure, to
diluted earnings per share, the most directly comparable GAAP
measure, in reliance on the “unreasonable efforts” exception set
forth in the rules of the U.S. Securities and Exchange Commission
(“SEC”).
AmeriGas
Because AmeriGas is unable to predict certain potentially
material items affecting net income on a GAAP basis, principally
mark-to-market gains and losses on commodity derivative
instruments, we cannot reconcile 2018 Adjusted EBITDA, a non-GAAP
measure, to net income attributable to AmeriGas Partners, L.P., the
most directly comparable GAAP measure, in reliance on the
“unreasonable efforts” exception set forth in SEC rules.
Adjustments that management can reasonably estimate are provided
below.
The following table includes a quantification of interest
expense, income tax expense, depreciation and amortization included
in the calculation of forecasted Adjusted EBITDA guidance range for
the fiscal year ending September 30, 2019:
Forecast Fiscal Year EndingSeptember 30,
2019
(Low End) (High End) Adjusted EBITDA (estimate) $ 610,000 $
650,000 Interest expense (estimate) 166,000 162,000 Income tax
expense (estimate) 3,000 3,500 Depreciation (estimate) 142,000
149,000 Amortization (estimate) 41,000 40,000
Forward-Looking Statements
All statements in this press release (and oral statements made
regarding the subjects of this communication) other than historical
facts are forward-looking statements. The safe harbor provisions
under Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934 do not apply to forward-looking
statements made or referred to in this release. These
forward-looking statements rely on a number of assumptions
concerning future events and are subject to a number of
uncertainties and factors, many of which are outside the control of
UGI and AmeriGas, which could cause actual results to differ
materially from such statements. Forward-looking information
includes, but is not limited to: statements regarding the expected
benefits of the proposed transaction to UGI and its shareholders
and to AmeriGas and its unitholders; the anticipated completion of
the proposed transaction and the timing thereof; the expected
future growth, dividends and distributions of the combined company;
and plans and objectives of management for future operations. While
UGI believes that the assumptions concerning future events are
reasonable, it cautions that there are inherent difficulties in
predicting certain important factors that could impact the future
performance or results of its business. Among the factors that
could cause results to differ materially from those indicated by
such forward-looking statements are: the failure to realize the
anticipated costs savings, synergies and other benefits of the
transaction; the possible diversion of management time on
transaction-related issues; the risk that the requisite approvals
to complete the transaction are not obtained; local, regional and
national economic conditions and the impact they may have on UGI,
AmeriGas and their customers; changes in tax laws that impact MLPs
and the continued analysis of recent tax legislation; conditions in
the energy industry, including cost volatility and availability of
all energy products, including propane, natural gas, electricity
and fuel oil as well as increased customer conservation measures;
adverse weather conditions; the financial condition of UGI’s and
AmeriGas’ customers; any non-performance by customers of their
contractual obligations; changes in customer, employee or supplier
relationships; changes in safety, health, environmental and other
regulations; liability for uninsured claims and for claims in
excess of insurance coverage; domestic and international political,
regulatory and economic conditions in the U.S. and in foreign
countries, including the current conflicts in the Middle East;
foreign currency exchange rate fluctuations (particularly the
euro); the timing of development of Marcellus Shale gas production;
the results of any reviews, investigations or other proceedings by
government authorities; addressing any reviews, investigations or
other proceedings by government authorities or shareholder actions;
the performance of AmeriGas; and the interruption, disruption,
failure, malfunction or breach of UGI’s or AmeriGas’ information
technology systems, including due to cyber-attack.
These forward-looking statements are also affected by the risk
factors, forward-looking statements and challenges and
uncertainties described in each of UGI’s and AmeriGas’ Annual
Reports on Form 10-K for the fiscal year ended September 30, 2018,
and those set forth from time to time in each entity’s filings with
the SEC, which are available at www.ugicorp.com and
www.amerigas.com, respectively. Except as required by law, UGI and
AmeriGas expressly disclaim any intention or obligation to revise
or update any forward-looking statements whether as a result of new
information, future events or otherwise.
No Offer or Solicitation
This press release is for informational purposes only and shall
not constitute an offer to sell or the solicitation of an offer to
buy any securities pursuant to the proposed transaction or
otherwise, nor shall there be any sale of securities in any
jurisdiction in which the offer, solicitation or sale would be
unlawful prior to the registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
Additional Information and Where You Can Find It
UGI and AmeriGas will each file with the SEC a Current Report on
Form 8-K, which will contain, among other things, a copy of the
merger agreement and the support agreement. In connection with the
proposed transaction, UGI and AmeriGas, as applicable, will file a
registration statement on Form S-4, including a proxy
statement/prospectus, and other related documents, including a
Schedule 13E-3, with the SEC. This press release is not a
substitute for the merger agreement, proxy statement/prospectus,
the Schedule 13E-3 or any other document that UGI or AmeriGas may
file with the SEC in connection with the transaction. BEFORE MAKING
ANY VOTING DECISION OR ELECTION, SECURITY HOLDERS OF AMERIGAS ARE
ADVISED TO CAREFULLY READ THE MERGER AGREEMENT, THE PROXY
STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS
THERETO), THE SCHEDULE 13E-3, AND ANY OTHER DOCUMENTS TO BE FILED
WITH THE SEC IN CONNECTION WITH THE TRANSACTION, WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
TRANSACTION, THE PARTIES TO THE TRANSACTION AND THE RISKS
ASSOCIATED WITH THE TRANSACTION. A definitive proxy
statement/prospectus will be sent to AmeriGas unitholders in
connection with the special meeting. Investors and security holders
may obtain a free copy of the proxy statement/prospectus (when
available), the Schedule 13E-3 (when available) and other relevant
documents filed by UGI or AmeriGas with the SEC from the SEC’s
website at www.sec.gov. Security holders and other interested
parties will also be able to obtain, without charge, a copy of the
proxy statement/prospectus, the Schedule 13E-3 and other relevant
documents (when available) from www.ugicorp.com under the tab
“Investor Relations” and then under the heading “SEC Filings.”
Participants in the Solicitation
UGI, AmeriGas, the General Partner and their respective
directors, executive officers and certain other members of
management may be deemed to be participants in the solicitation of
proxies from their respective security holders with respect to the
transaction. Information about these persons is set forth in UGI’s
proxy statement relating to its 2019 Annual Meeting of
Shareholders, which was filed with the SEC on December 20, 2018,
and AmeriGas’ Annual Report on Form 10-K for the fiscal year ended
September 30, 2018, which was filed with the SEC on November 20,
2018, and subsequent statements of changes in beneficial ownership
on file with the SEC. Security holders and investors may obtain
additional information regarding the interests of such persons,
which may be different than those of the respective companies’
security holders generally, by reading the joint proxy
statement/prospectus and other relevant documents regarding the
transaction, which will be filed with the SEC.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190402005527/en/
UGI and AmeriGasBrendan Heck, 610-337-1000 ext.
6608Alanna Zahora 610-337-1000 ext. 1004Shelly Oates, 610-337-1000
ext. 3202
MediaDaniel Yunger or Lindsay GrossKekst CNC+1 (212)
521-4800daniel.yunger@kekstcnc.com or lindsay.gross@kekstcnc.com
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