Star Group Announces Definitive Acquisition Agreement

Rhea-AI Summary

Star Group (NYSE:SGU) has announced a definitive agreement to acquire a home energy distributor within its existing operational footprint for approximately $68 million, excluding working capital adjustments. The transaction is expected to close within 45 days, pending governmental reporting requirements compliance. The company's CEO, Jeff Woosnam, stated that the acquisition of this well-established distributor is expected to strengthen Star Group's competitive position and serve as a strategic investment for both the company and its shareholders.

Positive

• Strategic acquisition within existing operational footprint, potentially leading to operational synergies
• Significant expansion with $68 million investment
• Expected strengthening of competitive market position

Negative

• Substantial capital outlay of $68 million may impact cash reserves
• Pending regulatory approval creates execution risk
• Working capital adjustments may increase final purchase price

Insights

Financial Analyst

The $68 million acquisition represents a significant strategic move for Star Group, constituting approximately 16.7% of its current market cap. Operating within SGU's existing footprint suggests potential synergies and operational efficiencies, likely reducing integration costs and risks. The timing aligns with the heating season, potentially allowing for immediate revenue contribution. While specific financial metrics of the target company aren't disclosed, the deal's size indicates it's a substantial addition to Star's operations. The working capital adjustments clause suggests the final price could fluctuate based on the target's current assets and liabilities at closing. This acquisition follows industry consolidation trends in the home energy distribution sector, where scale and operational efficiency are increasingly critical for profitability.

Market Research Analyst

This acquisition strengthens Star Group's market position in their core operating regions, potentially increasing local market share and customer density. The home energy distribution sector benefits significantly from economies of scale, particularly in route density and infrastructure utilization. The strategic timing before peak winter season could maximize immediate value capture. The target company being "well-established" suggests a stable customer base and proven operations, reducing integration risk. This move aligns with broader industry consolidation trends, where larger players are acquiring regional distributors to enhance operational efficiency and combat margin pressures. The deal's structure, requiring governmental reporting compliance, indicates it's a sizeable transaction that could meaningfully impact local market dynamics.

STAMFORD, Conn., Dec. 12, 2024 (GLOBE NEWSWIRE) -- Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home energy distributor and services provider, today announced it has entered into a definitive agreement to purchase a home energy distributor, located within the Company’s existing operating footprint, for approximately $68 million before working capital adjustments. Star anticipates closing on the transaction within the next 45 days, subject to compliance with governmental reporting requirements. Additional terms were not disclosed.

“I am pleased to announce that we have entered into a definitive agreement to purchase a well-established home energy distributor that is located within our existing operating footprint,” said Jeff Woosnam, Star Group’s President and Chief Executive Officer. “This business is expected to further strengthen our competitive position and be a sound investment for Star Group and our shareholders.”

About Star Group, L.P.
Star Group, L.P. is a full service provider specializing in the sale of home heating products and services to residential and commercial customers to heat their homes and buildings. The Company also sells and services heating and air conditioning equipment to its home heating oil and propane customers and, to a lesser extent, provides these offerings to customers outside of its home heating oil and propane customer base. Star also sells diesel, gasoline and home heating oil on a delivery only basis. We believe Star is the nation's largest retail distributor of home heating oil based upon sales volume. Including its propane locations, Star serves customers in the more northern and eastern states within the Northeast and Mid-Atlantic U.S. regions. Additional information is available by obtaining the Company's SEC filings at www.sec.gov and by visiting Star's website at www.stargrouplp.com, where unit holders may request a hard copy of Star’s complete audited financial statements free of charge.

Forward Looking Information
This news release includes "forward-looking statements" which represent the Company’s expectations or beliefs concerning future events that involve risks and uncertainties, including the impact of geopolitical events on wholesale product cost volatility, the price and supply of the products that we sell, our ability to purchase sufficient quantities of product to meet our customer’s needs, rapid increases in levels of inflation, the consumption patterns of our customers, our ability to obtain satisfactory gross profit margins, the effect of weather conditions on our financial performance, our ability to obtain new customers and retain existing customers, our ability to make strategic acquisitions, the impact of litigation, natural gas conversions and electrification of heating systems, pandemic and future global health pandemics, recessionary economic conditions, future union relations and the outcome of current and future union negotiations, the impact of current and future governmental regulations, including climate change, environmental, health, and safety regulations, the ability to attract and retain employees, customer credit worthiness, counterparty credit worthiness, marketing plans, cyber-attacks, global supply chain issues, labor shortages and new technology, including alternative methods for heating and cooling residences. All statements other than statements of historical facts included in this Report including, without limitation, the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein, are forward-looking statements. Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “seek,” “estimate,” and similar expressions are intended to identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Actual results may differ materially from those projected as a result of certain risks and uncertainties. These risks and uncertainties include, but are not limited to, those set forth under the heading "Risk Factors" and "Business Strategy" in our Annual Report on Form 10-K (the "Form 10-K") for the fiscal year ended September 30, 2024. Important factors that could cause actual results to differ materially from the Company’s expectations ("Cautionary Statements") are disclosed in this news release and in the Company’s Form 10-K and our Quarterly Reports on Form 10-Q. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. Unless otherwise required by law, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this news release.

CONTACT:
Star Group, L.P.		Chris Witty
Investor Relations		Darrow Associates
203/328-7310		646/438-9385 or cwitty@darrowir.com

FAQ

What is the value of Star Group's (SGU) latest acquisition announced in December 2024?

Star Group announced the acquisition of a home energy distributor for approximately $68 million, before working capital adjustments.

When is Star Group's (SGU) latest acquisition expected to close?

The acquisition is expected to close within 45 days from the December 12, 2024 announcement, subject to governmental reporting requirements.

How will the $68 million acquisition impact Star Group's (SGU) market position?

According to management, the acquisition is expected to strengthen Star Group's competitive position in its existing operational footprint.

What type of company is Star Group (SGU) acquiring in December 2024?

Star Group is acquiring a well-established home energy distributor located within the company's existing operating footprint.