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AmeriGas Merger and Acquisitions | 12 Months Ended
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Sep. 30, 2019
Business Combinations [Abstract] |
AmeriGas Merger and Acquisitions | Note 5 — AmeriGas Merger and Acquisitions AmeriGas Merger On August 21, 2019, the AmeriGas Merger was completed in accordance with the terms of the Merger Agreement entered into on April 1, 2019. Under the terms of the Merger Agreement, the Partnership was merged with and into Merger Sub, with the Partnership surviving as an indirect wholly owned subsidiary of UGI. Each outstanding Common Unit other than the Common Units owned by UGI was automatically converted at the effective time of the AmeriGas Merger into the right to receive, at the election of each holder of such Common Units, one of the following forms of merger consideration (subject to proration designed to ensure the number of shares of UGI Common Stock issued would equal approximately 34.6 million): (i)0.6378 shares of UGI Common Stock (the “Share Multiplier”); (ii)$7.63 in cash, without interest, and 0.500 shares of UGI Common Stock; or (iii)$35.325 in cash, without interest. Pursuant to the terms of the Merger Agreement, effective on August 21, 2019, we issued 34,612,847 shares of UGI Common Stock and paid $528.9 in cash to the holders of Common Units other than UGI, for a total implied consideration of $2,227.7. In addition, the incentive distribution rights in the Partnership previously owned by the General Partner were canceled. After-tax transaction costs directly attributable to the transaction that were incurred by UGI totaling $7.7 were recorded as a reduction to UGI stockholders’ equity. Transaction costs incurred by the Partnership totaling $6.3 are reflected in “Operating and administrative expenses” on the 2019 Consolidated Statement of Income. The tax effects of the AmeriGas Merger resulting from the step-up in tax bases of the underlying assets resulted in the recording of a deferred tax asset in the amount of $512.3. This deferred tax asset is included in “Deferred income taxes” on the September 30, 2019 Consolidated Balance Sheet. Effective upon completion of the AmeriGas Merger, Common Units are no longer publicly traded. Also pursuant to the Merger Agreement, Partnership equity-based awards were canceled and replaced with cash-settled restricted stock units relating to UGI Common Stock using the Share Multiplier ratio. For further information on the effects of the AmeriGas Merger on equity-based awards, see Note 14. The AmeriGas Merger was accounted for in accordance with ASC 810, Consolidation - Overall-Changes in a Parent’s Ownership Interest in a Subsidiary. Because UGI controlled AmeriGas Partners before and after the merger, the changes in UGI’s ownership interest in the Partnership resulting from the merger were accounted for as an equity transaction. Accordingly, no gain or loss was recognized in UGI’s consolidated income statement and the carrying amounts of the Partnership assets and liabilities were not adjusted. The tax effects of the AmeriGas Merger were reported as adjustments to deferred income taxes and UGI stockholders’ equity. For additional information on the tax effects of the AmeriGas Merger, see Note 7. CMG Acquisition On August 1, 2019, UGI through its wholly owned indirect subsidiary, Energy Services, completed the CMG Acquisition in which Energy Services acquired all of the equity interests in CMG and CMG’s approximately 47% interest in Pennant, for total cash consideration of $1,284.4, subject to final working capital and other adjustments. The CMG Acquisition was consummated pursuant to the CMG Acquisition Agreements. CMG and Pennant provide natural gas gathering and processing services through five discrete systems located in western Pennsylvania, eastern Ohio and the panhandle of West Virginia. The CMG Acquisition is consistent with our growth strategies, including expanding our midstream natural gas gathering and processing assets within the Marcellus and Utica Shale production regions. The CMG Acquisition was funded with cash from borrowings under the Energy Services Term Loan and the UGI Corporation Senior Credit Facility and cash on hand (See Note 6). The Company has accounted for the CMG Acquisition using the acquisition method. At September 30, 2019, the allocation of the purchase price is substantially complete but remains preliminary pending the completion of our third-party valuation report and with regard to the identification and resolution of certain pre-acquisition contingencies and disputes. These amounts are preliminary pending the receipt of additional information. The purchase price allocation will be finalized once these items have been resolved. Accordingly, the fair value estimates presented below relating to these items are subject to change within the measurement period not to exceed one year from the date of acquisition. The components of the preliminary CMG purchase price allocations are as follows:
Assets acquired: |
Cash | $ | 0.3 |
Accounts receivable | 11.3 |
Prepaid expenses and other current assets | 1.1 |
Property, plant and equipment | 613.2 |
Investment in Pennant | 88.0 |
Intangible assets (a) | 250.0 |
Total assets acquired | $ | 963.9 |
Liabilities assumed: |
Accounts payable | 3.3 |
Other noncurrent liabilities | 0.1 |
Total liabilities assumed | $ | 3.4 |
Goodwill | 323.9 |
Net consideration transferred (including preliminary working capital adjustments) | $ | 1,284.4 |
(a) | Represents customer relationships having an average amortization period of 35 years.
We allocated the purchase price of the acquisition to identifiable intangible assets and property, plant and equipment based on estimated fair values as follows:
• | Customer relationships were valued using a multi-period, excess earnings method. Key assumptions used in this method include discount rates, growth rates and cash flow projections. These assumptions are most sensitive and susceptible to change as they require significant management judgment; and
• | Property, plant and equipment were valued based on estimated fair values primarily using depreciated replacement cost and market value methods.
The excess of the purchase price for the CMG Acquisition over the preliminary fair values of the assets acquired and liabilities assumed has been reflected as goodwill, assigned to the Midstream & Marketing reportable segment, and results principally from anticipated future capital investment opportunities and value creation resulting from new natural gas processing assets in the Marcellus and Utica Shale production regions. The goodwill recognized from the CMG Acquisition is deductible for income tax purposes. The Company recognized $15.3 of direct transaction-related costs associated with the CMG Acquisition during Fiscal 2019, which costs are reflected in “Operating and administrative expenses” on the Consolidated Statements of Income. The CMG Acquisition did not have a material impact on the Company’s revenues or net income attributable to UGI for Fiscal 2019. In addition, the impact of the CMG Acquisition on a pro forma basis as if the CMG Acquisition had occurred on October 1, 2017 was not material to the Company’s consolidated results for Fiscal 2019 and Fiscal 2018. Other Acquisitions During Fiscal 2019, UGI International acquired several retail LPG distribution businesses, and Midstream & Marketing acquired a natural gas marketing business. During Fiscal 2018, UGI International acquired UniverGas, an LPG distribution business with operations in northern and central regions of Italy, and AmeriGas Propane acquired two retail propane distribution businesses. During Fiscal 2017, UGI International acquired DVEP, an energy marketing business with operations in the Netherlands, and an LPG distribution business with operations in Sweden, and AmeriGas Propane acquired several retail propane distribution businesses. Total cash paid and liabilities incurred in connection with these acquisitions were as follows:
|  | 2019 |  | 2018 |  | 2017
|  | UGI International |  | Midstream & Marketing |  | AmeriGas Propane |  | UGI International |  | AmeriGas Propane |  | UGI International
Total cash paid |  | $ | 49.3 |  |  | $ | 15.0 |  |  | $ | 10.1 |  |  | $ | 121.9 |  |  | $ | 36.8 |  |  | $ | 99.7 |
Liabilities incurred (a) |  | — |  |  | — |  |  | 2.7 |  |  | — |  |  | 10.8 |  |  | 20.6 |
Total purchase price |  | $ | 49.3 |  |  | $ | 15.0 |  |  | $ | 12.8 |  |  | $ | 121.9 |  |  | $ | 47.6 |  |  | $ | 120.3 |
(a) | UGI International Fiscal 2017 amount includes note payable to seller. AmeriGas Propane amounts principally comprise amounts payable under noncompete agreements.
Acquisitions of Assets During Fiscal 2019, Midstream & Marketing acquired 21 miles of natural gas gathering lines and related dehydration and compression equipment located in northern Pennsylvania for cash consideration of $20. During Fiscal 2018, Midstream & Marketing acquired (1) 60 miles of natural gas gathering lines and related dehydration and compression equipment, and a smaller natural gas gathering system, both located in northern Pennsylvania and (2) a 44-megawatt, natural gas-fired peaking turbine located on its Hunlock Station site in northeast Pennsylvania, for total cash consideration of $70.3.

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