SPI Buys Two Big Distributors


Rapidly growing SPI Petroleum LLC announced yesterday that it has bought two large fuel and lubricant distributors – the parent company of Rancho Dominguez, California-based General Petroleum, and Canyon State Oil Co., of Phoenix. The acquisitions give SPI and its affiliates annual revenues of more than $3 billion, making it one of the largest petroleum marketers in the United States.

SPI and its affiliates now operate 37 lubricant blending and packaging plants across the nation and sell approximately 35 million gallons of lubes per year.

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Roger Simons, chief executive officer of Simons Petroleum and the largest shareholder in SPI, maintained that SPI focuses more on the quality of its business than the scale. In the next breath, however, he acknowledged that size brings advantages.

The acquisitions weve made have added a tremendous amount of diversity to our business, so our profitability is much more secure than in the past, he told Lube Report. Also, it takes a lot of capital to run a business these days, so its important that being larger gives easier access to financial capital. And, of course, [being larger] helps in procurement strategies, so there are a lot of great synergies that result from becoming larger.

SPI, which is based in Oklahoma City, has completed several acquisitions in the past two and one-half years, but this weeks are the biggest. Pecos Inc., General Petroleums parent, is the nations largest distributor of Chevron lubricants and is one of the West Coasts largest suppliers of fuels and lubricants to the marine, commercial and industrial sectors.

Besides General Petroleum, Pecos owns Ranier Petroleum, a marine fuels and lubricants marketer in the Northwest; GP Atlantic, which sells fuels and automotive lubes in South Carolina; and Marine Oil Services, which supplies fuels and lubricants in Panama. The various operations have annual revenues of more than $800 million.

Canyon State supplies lubricants and fuels to the automotive, commercial and industrial segments and is one of the nations largest distributors of Shell lubes, Simons said. It posted more than $225 million in revenue last year.

Terms of the acquisitions were not disclosed. SPI assigned Pecos and Canyon State to a new holding company, Global Petroleum, and said they will continue to operate under their existing company names. Their existing management teams will likewise remain in place.

Information about sizes of petroleum marketers is generally scarce, but Simons said SPI is now one of the largest jobbers in the country, perhaps the largest. That was exactly the goal he laid out in April 2004, when Simons Petroleum joined with three private equity firms to form SPI. At that time, Simons said its annual revenues were in the neighborhood of $750 million per year, but the equity firms and two banks put up $90 million for acquisitions that would help it grow to a multi-billion company.

Simons said SPI isnt ready to stop growing. A fourth equity firm, Cadent Energy Partners LLC, joined the original three – Waud Capital Partners LLC, Northwest Capital Appreciation Inc. and RBC Capital Partners – to form Global Petroleum. In addition, SPI replaced its existing credit facilities with a $340 million credit facility led by three banks.

Most of that amount is dry powder, Simons said, explaining that it is available for acquisitions. He added that SPI is in discussions on other potential transactions and is considering a public stock offering at some point in the future.

Weve reached the goal we set just two and a half years ago, Simons said, but were not done by any means. Were just starting to roll.

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