Landmark Propane Deal Gets Green Light
A landmark deal in which the country’s biggest propane retailer will double is customer base has won approval from the Federal Trade Commission (FTC), Bloomberg reports.
AmeriGas Partners LP can proceed with its proposed $2.8 billion purchase of Energy Transfer Partners LP’s Heritage Propane, the commission announced last week.
However a condition of the sale excludes a cylinder exchange business, which federal regulator said would have reduced competition and led to higher prices to fuel propane grills and patio heaters.
AmeriGas serves 1.3 million customers with 1200 propane distribution facilities in all 50 states, and sells more than one billion gallons of propane a year.
The propane heavyweight announced the purchase of its rival’s Heritage Propane in October. The acquisition will double AmeriGas’ customer base and add over 500 million gallons to its distribution network.
The agreement is expected to free Energy Transfer Partners (ETP) to focus on its core natural gas pipeline business, which is booming as new drilling technology taps bountiful shale oil and gas supplies that need to be moved between markets.
Unit holders of Energy Transfer, which had been one of the largest propane marketers in the US with operations in 41 states, were expected to receive about $1.5 billion in cash and about $1.3 billion in AmeriGas common units under the deal.
“We are pleased to be completing this significant transaction at this time,” AmeriGas chairman Lon R. Greenberg said. “We are eager to commence the task of combining the best of AmeriGas and Heritage as we create a new standard of excellence in the U.S. propane distribution industry.”
In announcing its decision, the FTC said the cylinder exchange business exclusion was necessary to protect consumers from “substantially lessened competition in the nationwide market.”
By cutting competitors in the industry from three to two, the original proposal would also have ended the “maverick” role played by Heritage Propane Express, which helped promote lower prices and better terms to retailers.
According to the settlement, ETP has to maintain the viability of Heritage Propane Express for two years, or clear any sale of the unit with the FTC, reuters.com reports.