Just another bolt on acquisition. $28 million in total, probably bought at 6x or 7x cash flow. Again, as I have said before, the impact of these acquisitions by themselves on the distribution is diminimus but when viewed in the context of lumping them all together, you can piece together the puzzle pieces to see how they manage to grow the distribution at a 10% rate a year. A few cents here and there....look for NRGY to make 3 or 4 more of these by end of 04.
I would say that they purchased this for about 8 or 9 times the cash flow. With 10 million gallons they are going to be pressed to put off over 3 to 4 million EBIDAT. I understand they are running very high margins to make a profit increase. This may lead to customer losses. A few more of these highly leveraged buyouts at multiples of $2.80 per gallon and they may very well endanger the future of the company.
You may be correct on the multiple, I was just pulling a number that is historically in the ballpark. Not overly leveraged, NRGY issues units yielding roughly 7% and buys an asset for 8x or 9x which is roughly a yield of 12.5% or 11%. They pocket the spread and distribute it over the whole base of units.