Ferrellgas Partners LP
) has announced the recent acquisition of IGS Propane for an
undisclosed amount. Connecticut-based IGS Propane is a unit of
Industrial Gas and Supply. It specializes in supplying propane to
industrial customers and provides small propane tanks to the
general public of Naugatuck, Connecticut. The acquisition will be
immediately accretive to the partnership.
FERRELLGAS -LP (FGP): Free Stock Analysis
SUBURB PROPANE (SPH): Free Stock Analysis
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This transaction marks the partnership's third acquisition in the
current fiscal year, taking the tally to nearly 240 to date.
In fiscal-year 2011, Ferrellgas Partners served over 1 million
customers in all 50 states, the District of Columbia. As one of
the nation's largest propane-distributors, the partnership plans
to consolidate its client-coverage. Prior to this acquisition,
Ferrellgas Partners delivered propane to its
Connecticut-customers from neighboring states as it did not have
any local operation.
We know that transporting propane from other locations is a
costly as well as time-consuming factor. However, present
transaction will allow the partnership to provide service to its
local clients in time. This step will also enable Ferrellgas
Partners to curtail transportation expenses, which will in turn,
subsequently improve its financial performance. Moreover, propane
distribution industry is matured with limited growth opportunity.
The partnership can only improve its market share by acquiring
other propane distributors.
Recently, Ferrellgas Partners has made few significant buys. The
partnership purchased El Paso, Texas based Flores Gas in October
2012 and Sacramento, California based Capitol City Propane in
September 2012. These acquisitions will enable the partnership to
strengthen its presence in the state along with adding customer
It is evident that Ferrellgas Partners strongly follows inorganic
growth strategy to expand its domestic operation, particularly in
the Southwest and Northeast areas of the U.S. These acquisitions
are part of the partnership's long-term strategy to grow by an
aggressive pursuit of well-run propane companies.
However, we remain skeptical about the highly competitive propane
distribution business environment, seasonal variance in the
demand for propane, over-reliance on few propane suppliers and
higher degree of competition from other energy sources.
Like its peer
Suburban Propane Partners L.P.
), Ferrellgas Partners LP also has a short-term Zacks #3 Rank
Overland Park, Kansas-based Ferrellgas Partners is a leading
distributor of propane and related equipment in the U.S. The
partnership provides propane services to residential, industrial,
portable tank exchange, agricultural and wholesale customers.
Ferrellgas Partners has a market capitalization of $1.41