Genesis Energy has agreed to acquire the retail LPG business of Todd Corp's Nova Energy unit for $192 million, a move that will give New Zealand's biggest electricity retailer almost a fifth of that market.
The deal, which is subject to some limited due diligence, will increase Genesis Energy's share of retail LPG in New Zealand to 19 per cent from 3 per cent, making it the second-largest player in that market by customers behind Contact Energy.
The deal would deliver about $17m of earnings before interest, tax, depreciation, amortisation and movements in the value of financial instruments in 2018 before integration costs, and "generate synergies of $4-6m per annum from FY19 onwards mainly from vertical integration benefits," the company said in a statement. The purchase price represents an ebitdaf multiple of 8.5 times after synergies and will boost per-share earnings by about 5 per cent, it said.
"It will significantly accelerate our growth aspirations in the key LPG market consistent with our announced strategy which the company outlined last year," said chair Jenny Shipley.
Nova Energy's LPG distribution network "complements Genesis Energy's existing customer base as well as removing barriers to growth in new market segments such as bulk and SME," it said. That network includes a nationwide retail and bulk distribution system with 35,000 bottled gas customers across residential, commercial and industrial segments. The acquisition also includes about 6,400 dual fuel electricity and LPG customers and an option to acquire Nova's 12.5 per cent interest in Liquigas for additional consideration.
