Wednesday 19 December 2018

DCC splashes out €90m to enter German LPG market

DCC's chief executive, Donal Murphy
DCC's chief executive, Donal Murphy
John Mulligan

John Mulligan

Diversified distribution, sales and marketing group DCC is thought to be paying up to €90m to enter the German LPG market, as it continues its geographic expansion.

DCC is acquiring Tega-Technische Gase und Gasetechnik (TEGA), a unit of Linde. The business operates five sites, mostly in southern Germany.

Although DCC didn't reveal the acquisition price, it said the cash purchase would increase the group's total acquisition expenditure to £630m (€706m) so far in the current financial year, which ends in March.

DCC said TEGA, which is headquartered in Wurzburg, employs about 100 people and generates annual revenue of around €75m.

That revenue is evenly split between LPG and refrigerants.

TEGA supplies about 35,000 tonnes of LPG every year to a total of 15,000 domestic and commercial customers. It supplies refrigerant to wholesalers and end-users for use in air-conditioning, commercial cooling systems, and refrigerators.

DCC chief executive Donal Murphy said the acquisition will provide the group's LPG business with a platform in the large, "relatively fragmented" German LPG market, and further strengthens the group's presence in the wider European market.

"In addition, the acquisition of TEGA provides an entry into the refrigerant gas market further enhancing the service capability of our business, following our expansion into medical and aerosol gases in recent years," he added.

Davy Stockbrokers, which estimated that DCC has paid between £75m and £80m (€78.5m and €89.7m) for TEGA, said that the deal will give the Irish company about a 2.2pc share of the German LPG market.

Davy estimated that there are about 30 players in the German LPG market.

"In contrast to other European LPG markets, there has been minimal consolidation/transaction activity in Germany over the last 15 years given a cartel investigation and ongoing appeals by five of the major German LPG players," noted Davy Stockbrokers.

"Following initial fines in 2007 and increased fines on appeal in 2013, the companies are currently appealing in the Federal Court of Justice. Once complete, we think this could facilitate market consolidation over the medium term," it added.w

DCC has also established a significant presence in the LPG market in France in recent years.

It has also just completed its acquisition of Shell's LPG business in Hong Kong and Macau.

Irish Independent

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