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Johnson’s Petroleum buying Unipet

Published:Wednesday | February 3, 2016 | 2:00 AMNeville Graham
A Unipet service station.

Johnson's Petroleum emerged preferred buyer of rival United Petroleum - Unipet - on January 28 and the parties now say they expect to finalise the deal by the end of this month.

The bid price was not disclosed, but Lynford Johnson, owner and chairman of Johnson's Petroleum Holdings Limited, says he will be financing the acquisition from internal resources and additional backing from First Global Bank.

GK Capital Management, a sister company to First Global, is arranging the transaction on behalf of Unipet's expansive base of owners in what is Jamaica's first home-grown petroleum marketing company established in 1991.

Well-placed sources say that GK Capital got indicative interest from 20 prospective buyers, of which 10 were deemed to be serious. The 10 were later whittled down to three - Total, West Indies Petroleum, and Johnson's.

Johnson said he bid because he wanted the company to remain in local hands. He is not among the original Unipet owners.

Unipet has seven petrol stations in its network that spans Kingston, Manchester, St Catherine and St Elizabeth. Four locations of the petrol stations - Lyndhurst Road and Slipe Pen Road in Kingston; Gregory Park, St Catherine; and Mandeville, Manchester - are owned directly by the company. The other three - Porus in Manchester; Black River, St Elizabeth; and Summerfield, Clarendon - are owned by independent retailers.

The acquisition would come closing to doubling Johnson Petroleum's network, which now comprises eight petrol stations in five parishes. Johnson's Petroleum is headquartered at Beechwood Avenue, Kingston, with petrol stations in Golden Grove, St Thomas; Falmouth, Trelawny; Rock Hall and Red Hills in St Andrew; New Market and Malvern in St Elizabeth; and Castleton, St Mary. The company operates on a low price-high volume business model - the same as the Unipet service stations.

Lyndon Johnson plans to retain both brands citing the need to exploit brand loyalty among customers.

"There are persons who may be loyal to Johnson's and those that want to be loyal to Unipet so despite the change in ownership we want them to continue along those lines as we grow the business," he said.

The complex Unipet ownership structure sees it 80 per cent owned by Hagley Park Holdings Limited, which in turn is owned by about 40-50 persons that have current and past connections to the petroleum trade. The other 20 per cent is owned by 12 individuals, six of whom are deceased.

Companies Office records list Roy Hutchinson, Lt Col Reginald Chin, Carmen Chen, Ronald Grubb and Errol Edwards, along with Aston Hobbins, Paul Abrahams and Richard Shirley as directors of Hagley Park Holdings.

Chairman of Hagley Park Holdings Aston Hobbins confirmed earlier reports that the dwindling cadre of directors wanted to get some returns on their investment. The prospective sale of Unipet was first reported last May.

"Our ageing shareholder population was anxious to maximise their returns. I am proud of the company that we have built and the shareholders of Hagley Park Holdings are glad to have been able to bring in Johnson's Petroleum as the new owner of Unipet because we know that with Johnson's Petroleum at the helm, Unipet will have a bright future," said Hobbins, who was quoted in a release to The Gleaner on the private signing ceremony.

Hagley Park Holdings hired GK Capital in early 2015 to assess potential avenues for monetising the shareholdings in Unipet. After reviewing the business, GK Capital advised Hagley Park Holdings to divest the assets and operations. Lead investment banker Douglas Robinson structured the deal.

Managing Director of GK Capital, Steven Whittingham, said the negotiations were tough but rewarding.

"Rarely do you find a transaction where both parties are extremely happy at the end of intense negotiations but we are in a unique position where that is the case here," he said.

neville.graham@gleanerjm.com