DCC LPG Extends Global Reach to U.S.

As a startup in 1977, DCC LPG launched Flogas with a single truck near Dublin, Ireland. The company, a business unit of the Dublin-based international sales, marketing, and support services group DCC Plc, has since grown to be one of the largest suppliers in Europe with operations in eight countries, soon to be 10. In April 2017 it expanded into Asia with the acquisition of Royal Dutch Shell’s LPG distribution business in Hong Kong and Macau. That deal closed in January 2018. And in March 2018 it arrives on these shores following the sealing of a transaction to buy a significant portion of NGL Energy Partners’ (Tulsa) retail propane business for $200 million in cash.

That 10-state, midcontinent and western tranche includes NGL Energy’s flagship Hicksgas business, along with Pacer Propane, Propane Central, and a number of smaller brands. Hicksgas, founded by fuels pioneer C.W. Hicks in Roberts, Ill. in 1940, joined NGL Energy in 2010, with segment management and day-to-day operations led by C.W. Hicks’ grandsons Shawn and Todd Coady.

Hicksgas operates 43 service centers and 58 satellite facilities throughout Illinois, Indiana, Kansas, and seven other states across the Midwest and Northwest regions, and at the time of the NGL Energy transaction had completed 25 retail propane acquisitions on its own under the Coadys’ leadership. Shawn moved on to become president of NGL Energy’s retail division and also take a seat on its board of directors. 

“We’re transitioning our entire business unit, which includes all the retail propane operations west of Ohio and is set up as a standalone business unit,” said Shawn Coady, who currently serves as a director at large for the National Propane Gas Association (NPGA). “This marks DCC’s entry into the U.S. market. NGL Energy Partners is an excellent company, and while we did not anticipate this sale, it makes good business and economic sense, and it’s a good entry point for DCC.”

NGL Energy CEO and propane industry veteran Mike Krimball noted at the time of the sale that he also viewed the transaction as positive for both buyer and seller. “Shawn Coady and his team have built a tremendous business, providing DCC with a highly respected, experienced management team and a turnkey platform through which to build their U.S. retail propane operations.” He added the move served to fulfill NGL’s goal of achieving his company’s financial targets. Under the deal, NGL Energy Partners retains its retail propane businesses in the Northeastern, Mid-Atlantic, and Southeastern regions.

“We are very excited to enter a new chapter of our business with DCC and build on the success we’ve had prior to, and since, merging with NGL,” said Coady. “DCC’s extensive experience in retail propane across multiple international markets, their desire to retain all of our employees, and their vision for growth in the U.S. provides a compelling opportunity for the collective team.” He is joining DCC LPG management.

“This is a good platform for my staff and for DCC to grow its market. We ran as a standalone business within NGL, so this is a bolt-off, bolt-on transaction aimed at internal growth. DCC has disciplined, prudent capital growth plans to deploy capital aimed at quality returns for their investors.”

He commented that DCC LPG, itself based in Syston, Leicestershire County, England, apart from its parent company’s Dublin headquarters, was among a suite of acquisition suitors, and that he views the final deal structure as positive because of DCC’s affirmative and detailed U.S. growth plans, and the company’s marked success in the international arena.

“DCC looked at the U.S. market for some time. In order to enter the U.S., DCC wanted an acquisition of scale with a back office ready for growth, as well as a geographic spread that was appropriate. Excluding the majors, my staff and operations provided a point for DCC to enter the U.S., and a solid platform from which to build.”

Henry Cubbon, managing director of DCC LPG, observed that his multinational company had been looking at North America, particularly the U.S., for several years. “The market is similar on the bulk side to what we see in Europe, but with many more marketers and a greater focus on residential, rather than commercial segments, with only a limited threat from further extension of natural gas grids,” he said. 

“We also note that there are some specific areas of growth well-supported by industry bodies like PERC in applications such as power generation. The immediate difference we see with Europe is in the cylinder exchange market, which works differently to our experience elsewhere.”

Queried, generally, what led DCC to choose assets owned by NGL Energy, the first vice president of the World LPG Association (WLPGA) responded that “the business is well-managed by Shawn Coady and his team, with strong local brands and a solid on-the-ground presence with excellent storage and trucking assets in several states. Their entrepreneurial culture also fits well with our approach at DCC, where for over 40 years we have backed and supported independent management teams in each of our businesses.”

In Europe, DCC sources LPG from gas separation plants, refineries, and through imports, delivering by rail, road tanker, and cylinder truck. Its customers range from households to large multinational companies, and also include small businesses, hotels, restaurants, and farmers. Autogas fueling stations are also a key business component, where petrol stations dispense LPG to fuel over-the-road vehicles.

Since 1977, with that single delivery truck, DCC LPG has grown exponentially — then explosively. From Ireland, the company advanced with the support of its parent company, headed by former energy division chief and now CEO Donal Murphy, through acquisitions, and organically, to first become a leading operator across the Republic of Ireland and Northern Ireland. In 1984 it entered the United Kingdom through a series of purchases, including BP’s LPG business in 2012, to incorporate Flogas Britain. DCC LPG operates an extensive network of more than 40 depots spanning the isles.

As indicated by its website and literature, the enterprise followed up with its entry into the Benelux (Belgium, the Netherlands, and Luxembourg) and Scandinavian regions in 2012 when it acquired Benegas from BP in the Netherlands and Belgium, and Statoil’s operations in Norway and Sweden. In November 2015, DCC completed the acquisition of Butagaz SAS, a leading LPG business in France, from Shell for €464 million, to this point its largest and a major step forward in the continuing expansion of its LPG business. 

Again, in April 2017, DCC announced its expansion into Asia with an agreement to acquire Shell’s distribution business in Hong Kong and Macau. More recently, DCC announced its entry into the German LPG market as it proceeds with its geographic expansion. The company is acquiring Tega-Technische Gase und Gasetechnik (TEGA; Wurzburg), a unit of Linde. The business operates five sites, mostly in southern Germany.

Finally, growth continues apace in the UK. DCC LPG has furthered its business in Britain with the £28.7-million acquisition of Countrywide Farmers LPG, a company selling about 20,000 metric tons annually and supplying bulk and cylinder LPG to domestic, agricultural, and commercial customers. The deal is expected to close in March, along with the NGL Energy transaction.

Regarding its entry onto yet a third continent, DCC LPG’s managing director, Cubbon, observed that a startup would take too long. “Our preference was to acquire a quality Top-20 marketer with strong management which would give us the critical mass from which to build. The NGL Energy business meets our criteria. We will be looking to build out from the current NGL Energy business into areas local to where they are active today. We will invest in the business itself, and will also acquire other quality marketers and build these businesses and their brands in their respective communities.”

Overlooking LPG worldwide, Cubbon maintains that, “Overall, it must be positive that a group like DCC is investing capital in the U.S. market. And it comes with an agenda for growth. However, this does not mean that we view propane marketing as a global business. Our view is that the distribution of propane is a local activity requiring a close relationship with propane refinery and midstream suppliers, and local consumers supported by staff in the community.”

Moreover, he cautions that “There is a danger that marketers get too large and look, for example, to centralize customer service. We do, however, believe in learning from others now that DCC will be operating in 10 countries in Europe, the U.S., and Asia from the end of March. We will look to share experiences in how to best market and deliver propane, but these will be up to local teams to adopt only as they see fit. Hopefully, with our capital and knowhow, we can bring benefits to the NGL business and to the industry overall.”

Cubbon, along with other representatives of WLPGA, and Coady, are scheduled to attend this month’s NPGA board of directors meeting in Santa Barbara, Calif. The West Coast industry gathering also includes a PERC meeting. “We are delighted to be in the U.S., and in other markets we are supportive of industry organizations such as the NPGA and PERC in their promotion of propane as an exceptional energy. We look forward to participating in their events in 2018,” he said.

DCC LPG asserts that “LPG is a fuel for the future,” noting that it is becoming more plentiful due to growing supply while being recognized for its environmental credentials. “Our management team has ambitious plans to develop our existing businesses and extend our footprint globally through a strategy of both organic growth and acquisition. DCC Plc has a successful track record of acquiring both family-owned businesses and those owned by large public companies. The global LPG market is changing rapidly, and DCC LPG is developing and growing with it.” —John Needham