Note 19. Business Combinations

2018 Acquisitions

Acquisition from Cheshire Oil Company, LLC—On July 24, 2018, the Partnership acquired the assets of ten company-operated gasoline stations and convenience stores from Cheshire in a cash transaction. The portfolio consists of nine stores in New Hampshire and one in Brattleboro, Vermont. All of the locations are branded T-Bird Mini Marts and market Citgo fuel. The purchase price was approximately $33.4 million, including inventory. The acquisition was financed with borrowings under the Partnership’s revolving credit facility.

The acquisition was accounted for using the purchase method of accounting in accordance with the FASB’s guidance regarding business combinations. The Partnership’s financial statements include the results of operations of Cheshire subsequent to the acquisition date.

The following table presents the final allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):


Assets purchased:
Inventory	$	1,591
Property and equipment		32,269
Intangibles		337
Total identifiable assets purchased		34,197
Liabilities assumed:
Environmental liabilities		(1,174)
Other non-current liabilities		(109)
Total liabilities assumed		(1,283)
Net identifiable assets acquired		32,914
Goodwill		527
Net assets acquired	$	33,441

The Partnership engaged a third-party valuation firm to assist in the valuation of Cheshire’s property and equipment and intangible assets consisting of in-place leases. The Partnership’s third-party valuation firm considered the income, market and cost approaches in estimating the fair value of the property and equipment and intangible assets. The market and cost approaches were used to value the property and equipment based on the underlying asset class components of the property and equipment. The income approach was used to value the in-place leases.

The purchase price for the acquisition was allocated to assets acquired and liabilities assumed based on their estimated fair values. The Partnership then allocated the purchase price in excess of net tangible assets acquired to identifiable intangible assets, based on the valuation from the Partnership’s third‑party valuation firm. Any excess purchase price over the fair value of the net tangible and intangible assets acquired was allocated to goodwill and assigned to the GDSO reporting unit. The $0.5 million of goodwill was recognized as the transaction expanded the Partnership’s retail presence in New Hampshire and enables the Partnership to benefit from economies of scale in the purchase of gasoline and convenience store merchandise. The goodwill is expected to be tax deductible. The operations of Cheshire have been integrated into the GDSO reporting segment.

The fair value of $1.2 million assigned to the assumption of environmental liabilities was developed by management based on their estimates, assumptions and acquisition history (see Note 13).

The fair values of the remaining Cheshire assets and liabilities noted above approximate their carrying values as of the acquisition date.

The Partnership utilized accounting guidance related to intangible assets which lists the pertinent factors to be considered when estimating the useful life of an intangible asset. These factors include, in part, a review of the expected use by the Partnership of the assets acquired, the expected useful life of another asset (or group of assets) related to the acquired assets and legal, regulatory or other contractual provisions that may limit the useful life of an acquired asset. The Partnership amortizes these intangible assets over their estimated useful lives which is consistent with the estimated undiscounted future cash flows of these assets.

As part of the purchase price allocation, identifiable intangible assets include in-place leases that are being amortized over one year. Amortization expense related to these intangible assets was $0.1 million for the year ended December 31, 2018.

In connection with the acquisition of Cheshire, the Partnership incurred acquisition costs of approximately $0.4 million for the year ended December 31, 2018, which are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Cheshire’s revenues and net income included in the Partnership’s consolidated operating results from July 24, 2018, the acquisition date, through December 31, 2018 were immaterial.

Acquisition from Champlain Oil Company, Inc.—On July 17, 2018, the Partnership acquired retail fuel and convenience store assets from Champlain in a cash transaction. The acquisition included 37 company-operated gasoline stations with Jiffy Mart-branded convenience stores in Vermont and New Hampshire and approximately 24 fuel sites that are either owned or leased, including lessee dealer and commission agent locations. The transaction also included fuel supply agreements for approximately 65 gasoline stations, primarily in Vermont and New Hampshire. The stations primarily market major fuel brands such as Mobil, Shell, Citgo, Sunoco and Irving. The purchase price was approximately $138.2 million, including inventory. The acquisition was financed with borrowings under the Partnership’s revolving credit facility.

The purchase price allocation is considered preliminary, and additional adjustments may be recorded during the allocation period in accordance with the FASB’s guidance regarding business combinations. The purchase price allocation will be finalized as the Partnership receives additional information relevant to the acquisition, including the final valuation of the assets purchased, including tangible and intangible assets, and liabilities assumed.

The following table presents the preliminary allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):


Assets purchased:
Inventory	$	5,450
Prepaid expenses and other current assets		270
Property and equipment		112,871
Intangibles		12,936
Total identifiable assets purchased		131,527
Liabilities assumed:
Accrued expenses and other current liabilities		(131)
Environmental liabilities		(10,757)
Other non-current liabilities		(938)
Total liabilities assumed		(11,826)
Net identifiable assets acquired		119,701
Goodwill		18,478
Net assets acquired	$	138,179

Management is in the process of evaluating the purchase price accounting. The Partnership engaged a third-party valuation firm to assist in the valuation of Champlain’s property and equipment and intangible assets consisting of dealer supply contracts, in-place leases and franchise rights. This valuation continues to be in process and, during the year ended December 31, 2018, the Partnership received preliminary fair values of these assets. The estimated fair values of property and equipment of $112.9 million and intangibles assets of $12.9 million were developed by management based on their estimates, assumptions and acquisition history, including preliminary reports from the third-party valuation firm. The estimated fair values of the property and equipment and intangible assets will be supported by the valuations performed by the third-party valuation firm. It is possible that once the Partnership receives the completed valuations on the property and equipment and intangible assets, the final purchase price accounting may be different than what is presented above.

The preliminary purchase price for the acquisition was allocated to assets acquired and liabilities assumed based on their estimated fair values. The Partnership then allocated the purchase price in excess of net tangible assets acquired to identifiable intangible assets, based upon their estimates and assumptions. Any excess purchase price over the fair value of the net tangible and intangible assets acquired was allocated to goodwill and assigned to the GDSO reporting unit. The $18.5 million of goodwill was recognized as the transaction expanded the Partnership’s retail portfolio and geographic footprint in New England and provides additional volume to the Partnership’s terminals in New York and Vermont. The goodwill is expected to be tax deductible. The operations of Champlain have been integrated into the GDSO reporting segment.

The fair value of $10.7 million assigned to the assumption of environmental liabilities was developed by management based on their estimates, assumptions and acquisition history (see Note 13).

The fair values of the remaining Champlain assets and liabilities noted above approximate their carrying values as of the acquisition date.

As part of the purchase price allocation, identifiable intangible assets include dealer supply contracts, in-place leases and franchise rights that are being amortized between one and ten years. Amortization expense related to these intangible assets was $1.2 million for the year ended December 31, 2018.

In connection with the acquisition of Champlain, the Partnership incurred acquisition costs of approximately $3.5 million for the year ended December 31, 2018 which are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Champlain’s revenues and net income included in the Partnership’s consolidated operating results from July 17, 2018, the acquisition date, through December 31, 2018 were immaterial.

2017 Acquisition

Honey Farms, Inc.—On October 18, 2017, the Partnership completed the acquisition of retail gasoline and convenience store assets from Honey Farms in a cash transaction. The acquisition included 11 company-operated retail sites with gasoline and convenience stores and 22 company-operated stand-alone convenience stores. All of the sites are located in and around the greater Worcester, Massachusetts area. The purchase price was approximately $38.5 million, including inventory. The acquisition was financed with borrowings under the Partnership’s revolving credit facility.

The following table presents the final allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):


Assets purchased:
Inventory	$	2,999
Property and equipment		14,087
Intangibles		1,370
Other non-current assets		3
Total identifiable assets purchased		18,459
Liabilities assumed:
Environmental liabilities		(1,119)
Other non-current liabilities		(352)
Total liabilities assumed		(1,471)
Net identifiable assets acquired		16,988
Goodwill		21,491
Net assets acquired	$	38,479

During the year ended December 31, 2018, the Partnership recorded a change to the preliminary purchase accounting, specifically related to the value assigned to the environmental liabilities. The impact of this change decreased goodwill to $21.5 million at December 31, 2018 from $21.6 million at December 31, 2017 as follows (in thousands):


Goodwill – December 31, 2017	$	21,630
Decrease in environmental liabilities		(139)
Goodwill – December 31, 2018	$	21,491

The Partnership engaged a third-party valuation firm to assist in the valuation of Honey Farms’ property and equipment, intangible assets consisting of in-place leases, favorable leasehold interests and franchise rights, and other non-current liabilities consisting of unfavorable leasehold interests. The Partnership’s third-party valuation firm considered the income, market and cost approaches in estimating the fair value of the property and equipment, intangible assets and other non-current liabilities. The market and cost approaches were used to value the property and equipment based on the underlying asset class components of the property and equipment. The income approach was used to value the in-place leases, franchise rights and favorable and unfavorable leasehold interests.

The purchase price for the acquisition was allocated to assets acquired and liabilities assumed based on their estimated fair values. The Partnership then allocated the purchase price in excess of net tangible assets acquired to identifiable intangible assets, based upon a valuation from the Partnership’s third‑party valuation firm. Any excess purchase price over the fair value of the net tangible and intangible assets acquired was allocated to goodwill and assigned to the GDSO reporting unit. The $21.5 million of goodwill was recognized as the transaction expanded the Partnership’s footprint and enables the Partnership to benefit from economies of scale in the purchase of gasoline and convenience store merchandise. The goodwill is expected to be tax deductible. The operations of Honey Farms have been integrated into the GDSO reporting segment.

The fair value of $1.1 million assigned to the assumption of environmental liabilities was developed by management based on their estimates, assumptions and acquisition history (see Note 13).

The fair values of the remaining Honey Farms assets and liabilities noted above approximate their carrying values as of the acquisition date.

As part of the purchase price allocation, identifiable intangible assets include in-place leases, favorable leasehold interests and franchise rights that are being amortized over one, three and three years, respectively. Amortization expense related to the intangible assets was $0.9 million for the year ended December 31, 2018 and immaterial for the year ended December 31, 2017. The in-place leases, favorable leasehold interests and franchise rights have a weighted average term of approximately three, two and four years, respectively, prior to their next renewal.

In connection with the acquisition of Honey Farms, the Partnership incurred acquisition costs of approximately $0.7 million which are included in selling, general and administrative expenses in the accompanying consolidated statements of operations for the year ended December 31, 2017.

Supplemental Pro Forma Information—Revenues and net income not included in the Partnership’s consolidated operating results for Cheshire, Champlain and Honey Farms from January 1, 2017 through the respective acquisition date were immaterial.