Partnership Acquisition of Heritage Propane

6 Months Ended

Mar. 31, 2012

Partnership Acquisition of Heritage Propane [Abstract]

Partnership Acquisition of Heritage Propane

4. Partnership Acquisition of Heritage Propane

On January 12, 2012 (the “Acquisition Date”), AmeriGas Partners completed the acquisition of Heritage Propane from ETP for total consideration of $2,598.2 comprising $1,465.6 in cash and 29,567,362 AmeriGas Partners Common Units with a fair value of approximately $1,132.6 (the “Heritage Acquisition”). The cash consideration for the Heritage Acquisition was subject to purchase price adjustments based on working capital, cash and the amount of indebtedness of Heritage Propane (“Working Capital Adjustment”). In April 2012, AmeriGas Partners paid $25.5 of additional cash consideration as a result of the Working Capital Adjustment. The Heritage Acquisition was consummated pursuant to a Contribution and Redemption Agreement dated October 15, 2011, as amended (the “Contribution Agreement”), by and among AmeriGas Partners, ETP, Energy Transfer Partners GP, L.P., the general partner of ETP (“ETP GP”), and Heritage ETC, L.P. (the “Contributor”). The acquired business conducts its propane operations in 41 states through HOLP and Titan LLC. According to LP-Gas Magazine rankings published on February 1, 2012, Heritage Propane was the third largest retail propane distributor in the United States, delivering over 500 million gallons to more than one million retail propane customers in 2011. The Heritage Acquisition is consistent with our growth strategies, one of which is to grow our core business through acquisitions.

Pursuant to the Contribution Agreement, the Contributor contributed to AmeriGas Partners a 99.999% limited partner interest in HOLP; a 100% membership interest in Heritage Operating GP, LLC, a Delaware limited liability company and a holder of a 0.001% general partner interest in HOLP; a 99.99% limited partner interest in Titan Energy Partners, L.P., a Delaware limited partnership and the sole member of Titan LLC; and a 100% membership interest in Titan Energy GP, L.L.C., a Delaware limited liability company and holder of a 0.01% general partner interest in Titan Energy Partners, L.P. Immediately prior to the consummation of the Heritage Acquisition, HOLP transferred its interests in all of the net assets constituting HOLP’s cylinder exchange business (“HPX”) to an indirect wholly owned subsidiary of ETP and ETP has agreed to use its best efforts to sell HPX to a third party. In accordance with the Contribution Agreement, to the extent that the gross proceeds of ETP’s sale of HPX exceed $40, AmeriGas Partners will receive a share of such excess and, to the extent such gross proceeds of the sale of HPX are less than such amount, AmeriGas Partners will pay Contributor an amount equal to the shortfall. As a result of the Heritage Acquisition, the General Partner, in order to maintain its general partner interests in AmeriGas Partners and AmeriGas OLP, contributed 934,327 Common Units to the Partnership having a fair value of $41.7. These Common Units were subsequently cancelled.

The cash portion of the Heritage Acquisition was financed by the issuance by AmeriGas Finance Corp. and AmeriGas Finance LLC, wholly owned finance subsidiaries of AmeriGas Partners (the “Issuers”), of $550 principal amount of 6.75% Senior Notes due May 2020 (the “6.75% Notes”) and $1,000 principal amount of 7.00% Senior Notes due May 2022 (the “7.00% Notes”). For further information on the 6.75% Notes and the 7.00% Notes, see Note 10.

The Condensed Consolidated Balance Sheet at March 31, 2012 reflects a preliminary allocation of the purchase price to the assets acquired and liabilities assumed. The purchase price paid comprises AmeriGas Partners Common Units issued having a fair value of $1,132.6, and total net cash consideration of $1,491.1 which includes $25.5 for the Working Capital Adjustment and cash acquired of $60.7. The Partnership is in the process of obtaining information required to determine the fair values of certain assets and liabilities acquired principally long-term intangible and tangible assets. The preliminary purchase price allocation is as follows:

Assets acquired:
Current assets	$	281.2
Property, plant & equipment		890.5
Customer relationships (estimated useful life of 15 years)		418.9
Trademarks and tradenames		144.2
Goodwill		1,184.9
Other assets		10.4
Total assets acquired	$	2,930.1
Liabilities assumed:
Current liabilities	$	(222.9	)
Long-term debt		(61.6	)
Other noncurrent liabilities		(21.9	)
Total liabilities assumed	$	(306.4	)
Total	$	2,623.7

Goodwill associated with the Heritage Acquisition principally results from synergies expected from combining the operations and from assembled workforce. The tax effects of such goodwill will be realized over a fifteen-year period.

Transaction expenses associated with the Heritage Acquisition, which are included in operating and administrative expenses on the Condensed Consolidated Statements of Income, totaled $3.6 and $4.7 for the three and six months ended March 31, 2012, respectively. Through March 31, 2012, we have recorded $404.2 in revenues and approximately $97 in operating income as a result of the Heritage Acquisition.

The results of operations of Heritage Propane are included in the Condensed Consolidated Statements of Income since the Acquisition Date. The following presents unaudited pro forma income statement and earnings per share data as if the Heritage Acquisition had occurred on October 1, 2010:

	For the Three Months				For the Six Months
	Ended March 31,				Ended March 31,
	2012		2011		2012		2011
Revenues	$	2,496.8	$	2,730.9	$	4,680.0	$	4,922.2
Net income attributable to UGI Corporation	$	133.4	$	157.1	$	218.8	$	268.2
Earnings per common share attributable to UGI Corporation stockholders:
Basic	$	1.19	$	1.41	$	1.95	$	2.41
Diluted	$	1.18	$	1.39	$	1.93	$	2.38

The unaudited pro forma results of operations reflect Heritage Propane’s historical operating results after giving effect to adjustments directly attributable to the transaction that are expected to have a continuing effect. The unaudited pro forma consolidated results of operations are not necessarily indicative of the results that would have occurred had the Heritage Acquisition occurred on the date indicated nor are they necessarily indicative of future operating results.

In accordance with the Contribution Agreement, ETP and the Partnership entered into a transition services agreement and ETP, HPX and the Partnership also entered into a transition services agreement, (collectively, the “TSA”) whereby each party may be a provider and receiver of certain services to the other. The principal services include general business continuity, information technology, accounting, tax and administrative services. Services under the TSA will be provided through the expiration of the term relating to each service or until such time as mutually agreed by the parties. Amounts associated with such services were not material.