DCC Plc, an Irish distributor of products from food to medical devices, agreed to buy a network of French gas stations from Esso SAF for 106 million euros ($140 million) to expand in the European fuel business.
The purchase of 274 unmanned petrol stations, 48 motorway concessions and 75 supply contracts -- which generate about 2.2 billion euros of annual revenue -- will give the Dublin-based company a 4 percent share of the French market, DCC said today. The sale, to be completed by the first half, follows the May purchase of a Swedish gas retailer for about $66 million.
DCC has benefited from buying retail assets from major oil companies as consumers in Europe turn to unmanned gas stations for cheaper supplies, the company said. The automated gas stations for sale were “low margin,” yet offered “consistent and stable” returns on capital employed and would be a platform for growth in France, Chief Executive Officer, Tommy Breen said in a telephone interview today.
“Energy is our biggest business and this is something that we’ve been talking about,” the CEO said. “An area that we wanted to expand our energy business in is the whole unmanned petrol area.”
In addition to the cash payment for the assets, DCC will pay for stock in tank at the completion date.
The deal may increase DCC’s annual operating profit by about 5.5 percent, according to Merrion Stockbrokers, which retained its buy rating on the company’s stock.
“We believe that DCC will continue to make strategic and fiscally attractive acquisitions,” said David Holohan, an analyst at Merrion, who increased DCC’s target price to 3,820 pence.
DCC shares rose as much as 2.3 percent and were trading up 1.8 percent at 3,520 pence at 1:00 p.m. in London, taking the advance this year to 18 percent.
Jefferies Group LLC, which holds a buy rating on DCC stock increased the company’s target price to 4,150 pence, citing a reduction in DCC’s exposure to a “weather sensitive heating oil” business from 20 percent to 16 percent.
“If we waved a magic wand, we’d like to wake up in a few years and maybe the heating element might be slightly less,” Breen said, adding that 16 percent is still a “significant number, so we certainly haven’t removed that volatility.”
Breen said the company could spend 150 million pounds to 200 million pounds a year on expanding its energy business as well as its health-care and technology divisions.
“Over time we will see, not dramatically larger, but larger opportunities,” he said. “The lifeblood of this company is making lots of those smaller acquisitions.”
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