Ferrellgas Partners L.P.
) announced the acquisition of the propane operation of Western
Petroleum for an undisclosed amount. The partnership started the
process of this acquisition from Aug 1, 2012.
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Utah-based Western Petroleum engages in selling and transporting
diesel fuel, gasoline, kerosene, lubricants with multiple brands,
propane, and several kinds of chemicals including methanol and
washer fluid. It operates primarily in the Rocky Mountain and the
southern states, and the northern plains.
Prior to this acquisition, Ferrellgas Partners did not have a
strong existence in Utah, northwest Colo. and Wyo. For a long
time, the partnership has been targeting to expand its operations
in this territory. This acquisition provides Ferrellgas Partners
an opportunity to establish its first retail set-up in Utah.
This marks Ferrellgas Partners' fifth acquisition in the current
fiscal year, taking the total tally to nearly 242 to date. The
partnership's recent significant buys were N.Y.-based Mr. Bar-B-Q
in Mar 2013, Conn.-based IGS Propane in Dec 2012, El Paso-based
Flores Gas in Oct 2012 and Sacramento-based Capitol City Propane
in Sep 2012. These acquisitions will enable Ferrellgas Partners
to strengthen its presence in the state and add customers.
We know that Ferrellgas Partners follows a couple of rationale in
terms of its acquisition strategy, including acquiring an
organization having the same line of business and the take-over
should be immediately accretive. We believe the current
acquisition to be immediately accretive to the partnership, given
Western Petroleum's presence in the region.
It is evident that Ferrellgas Partners strongly follows an
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
However, we believe that a highly competitive propane
distribution business environment, over-reliance on a few propane
suppliers and higher degree of competition from other energy
sources may to some extent challenge Ferrellgas Partners' future
Ferrellgas Partners currently has a Zacks Rank #3 (Hold). Besides
the partnership, the stocks of
Calumet Specialty Products Partners LP
NGL Energy Partners LP
) with a Zacks Rank #1 (Strong Buy), and
Delek US Holdings, Inc.
) with a Zacks Rank #2 (Buy) are worth considering.