DEFM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

(Rule 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under §240.14a-12

AMERIGAS PARTNERS, L.P.

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

  (4)  

Proposed maximum aggregate value of transaction:

 

     

  (5)  

Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.

 

     

  (3)  

Filing Party.

 

     

  (4)  

Date Filed.

 

     

 

 

 


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LOGO

MERGER PROPOSAL—YOUR VOTE IS VERY IMPORTANT

July 12, 2019

Dear Common Unitholders of AmeriGas Partners, L.P.:

On April 1, 2019, UGI Corporation (“UGI”), AmeriGas Partners, L.P. (“AmeriGas”) and certain of their affiliates entered into a merger agreement (as may be amended from time to time, the “merger agreement”), pursuant to which AmeriGas Propane Holdings, LLC, an indirect, wholly owned subsidiary of UGI, will merge with and into AmeriGas, with AmeriGas continuing as the surviving entity and an indirect, wholly owned subsidiary of UGI (the “merger”). The board of directors (the “GP Board”) of AmeriGas Propane, Inc. (the “General Partner”), the general partner of AmeriGas and an indirect, wholly owned subsidiary of UGI, approved and agreed to submit the merger agreement and the merger to a vote of AmeriGas common unitholders (“AmeriGas Unitholders”) following the recommendation of the audit committee of the GP Board (the “GP Audit Committee”). The GP Audit Committee has determined that the merger agreement and the merger are fair and reasonable to, and in the best interests of, AmeriGas and the AmeriGas Unitholders who are unaffiliated with UGI or the General Partner (the “Unaffiliated AmeriGas Unitholders,” which term, as used herein, excludes directors and executive officers of UGI and the General Partner), approved the merger agreement and the merger, and recommended that the GP Board approve the merger agreement and the merger. Based on a number of factors, including the recommendation of the GP Audit Committee, the GP Board has determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair and reasonable to, and in the best interests of, AmeriGas and the Unaffiliated AmeriGas Unitholders, and has approved the merger agreement and the merger. Under the terms of the merger agreement, subject to certain adjustments, each of the common units representing limited partner interests in AmeriGas (“AmeriGas common units”) (other than AmeriGas common units held by UGI or its subsidiaries, including the General Partner) will be automatically converted into the right to receive, at the election of each AmeriGas Unitholder, but subject to any applicable withholding tax and proration as described in the accompanying proxy statement/prospectus, one of the following forms of consideration (collectively, the “merger consideration”): (i) 0.6378 shares of common stock, with no par value, of UGI (“UGI Shares”; such election, a “Share Election”); (ii)(A) $7.63 in cash, without interest, and (B) 0.500 UGI Shares (such election, a “Mixed Election”); or (iii) $35.325 in cash, without interest (such election, a “Cash Election”).

The merger consideration to be received by AmeriGas Unitholders (other than UGI and its subsidiaries, including the General Partner) is valued at approximately $35.325 per AmeriGas common unit based on the closing price of UGI’s common stock as of April 1, 2019, the last trading day before the public announcement of the merger, representing an approximate 13.5% premium to the closing price of AmeriGas common units of $31.13 on April 1, 2019 and a 21.9% premium to the volume-weighted average price of AmeriGas common units for the 30 trading days ended April 1, 2019. The Mixed Election merger consideration is valued at approximately $34.24 per unit based on the closing price of UGI common stock as of July 8, 2019, representing a 2.2% discount to the closing price of AmeriGas common units of $35.00 on July 8, 2019, and a 2.0% discount to the volume-weighted average price of AmeriGas common units for the five trading days ended July 8, 2019.

UGI’s common stock and AmeriGas’ common units are traded on the New York Stock Exchange (“NYSE”) under the symbols “UGI” and “APU,” respectively.

AmeriGas is holding a special meeting of its common unitholders at the Sheraton Valley Forge Hotel at 480 North Gulph Road, King of Prussia, PA 19406, on August 21, 2019 at 10:00 a.m., local time, to obtain the vote of the AmeriGas Unitholders to approve the merger agreement and the transactions contemplated thereby, including the merger (the “special meeting”). Your vote is very important regardless of the number of AmeriGas common units you own. The merger cannot be completed unless the holders of at least a majority of the outstanding AmeriGas common units vote to approve the merger agreement and the transactions contemplated thereby, including the merger, at the special meeting. The GP Board recommends that AmeriGas Unitholders vote FOR the approval of the merger agreement and the transactions contemplated thereby, including the merger, FOR the proposal to approve the adjournment of the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes to approve the merger agreement and the transactions contemplated thereby, including the merger, at the time of the special meeting and FOR the approval of the advisory compensation proposal. Pursuant to a support agreement, the General Partner, which owns the general partner interest in AmeriGas, including the incentive distribution rights, as well as 23,756,882 AmeriGas common units representing approximately 25.5% of the AmeriGas common units outstanding as of July 1, 2019, has agreed to vote all of the AmeriGas common units owned beneficially or of record by it in favor of the approval of the merger agreement and the transactions contemplated thereby, including the merger, and the approval of any actions necessary or desirable in furtherance thereof. Whether or not you expect to attend the special meeting in person, we urge you to submit your proxy as promptly as possible through one of the delivery methods described in the accompanying proxy statement/prospectus.

In addition, we urge you to read carefully the accompanying proxy statement/prospectus (and the documents incorporated by reference into the accompanying proxy statement/prospectus), which includes important information about the merger agreement, the merger and the special meeting. Please pay particular attention to the section titled “Risk Factors ,” beginning on page 107 of the accompanying proxy statement/prospectus.

On behalf of the GP Board, we thank you for your continued support.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under the accompanying proxy statement/prospectus or determined that the accompanying proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

The accompanying proxy statement/prospectus is dated July 12, 2019 and is first being mailed to the AmeriGas Unitholders on or about July 15, 2019.

Sincerely,

 

 

LOGO

John L. Walsh

Chairman of the Board of AmeriGas

Propane, Inc., on behalf of AmeriGas

Partners, L.P.


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LOGO

460 North Gulph Road

King of Prussia, PA 19406

NOTICE OF SPECIAL MEETING OF COMMON UNITHOLDERS

TO BE HELD ON AUGUST 21, 2019

To the Common Unitholders of AmeriGas Partners, L.P.:

Notice is hereby given that a special meeting of common unitholders of AmeriGas Partners, L.P. (“AmeriGas”), will be held at the Sheraton Valley Forge Hotel at 480 North Gulph Road, King of Prussia, PA 19406, on August 21, 2019 at 10:00 a.m., local time (the “special meeting”), solely for the following purposes:

 

   

Merger proposal: To consider and vote on a proposal to approve the Agreement and Plan of Merger, dated as of April 1, 2019 (as may be amended from time to time, the “merger agreement”), by and among UGI Corporation (“UGI”), AmeriGas Propane Holdings, Inc. (“Holdings”), AmeriGas Propane Holdings, LLC (“Merger Sub”), AmeriGas and AmeriGas Propane, Inc., the general partner of AmeriGas (the “General Partner”), a copy of which is attached as Annex A to the proxy statement/prospectus accompanying this notice, and the transactions contemplated thereby, including the merger of Merger Sub with and into AmeriGas, with AmeriGas continuing as the surviving entity and an indirect, wholly owned subsidiary of UGI (the “merger”);

 

   

Adjournment proposal: To consider and vote on a proposal to approve the adjournment of the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes to approve the merger agreement and the transactions contemplated thereby, including the merger, at the time of the special meeting; and

 

   

Advisory compensation proposal: To consider and vote on a proposal to approve, by a non-binding advisory vote, the compensation arrangements disclosed in the accompanying proxy statement/prospectus that may be payable to AmeriGas’ named executive officers in connection with the completion of the merger.

These items of business, including the merger agreement and the merger, are described in detail in the accompanying proxy statement/prospectus. The board of directors (the “GP Board”) of the General Partner and the audit committee of the GP Board (the “GP Audit Committee”) have determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair and reasonable to, and in the best interests of, AmeriGas and the holders of AmeriGas common units (the “AmeriGas Unitholders”) unaffiliated with UGI or the General Partner (the “Unaffiliated AmeriGas Unitholders,” which term, as used herein, excludes directors and executive officers of UGI and the General Partner), and the GP Board recommends that AmeriGas Unitholders vote “FOR” the approval of the merger agreement and the transactions contemplated thereby, including the merger, “FOR” the proposal to approve the adjournment of the special meeting, if necessary, to solicit additional proxies in favor of the approval of the merger agreement and “FOR” the approval of the advisory compensation proposal.

Only AmeriGas Unitholders of record as of the close of business on July 1, 2019 are entitled to notice of the special meeting and to vote at the special meeting or at any adjournment or postponement thereof. A list of AmeriGas Unitholders entitled to vote at the special meeting will be available in our offices located at 460 North Gulph Road, King of Prussia, Pennsylvania 19406, during regular business hours for a period of not less than 10 days before the special meeting, and at the place of the special meeting during the special meeting. Pursuant to a support agreement, dated as of April 1, 2019 (the “Support Agreement”), by and between AmeriGas and the General Partner, the General Partner has agreed to vote all of the common units representing limited partner interests in AmeriGas (“AmeriGas common units”) owned beneficially or of record by it “FOR” the approval of


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the merger agreement and the transactions contemplated thereby, including the merger, and the approval of any actions necessary or desirable in furtherance thereof, which includes the advisory compensation proposal and, if necessary, the adjournment proposal. As of July 1, 2019, the General Partner held 23,756,882 AmeriGas common units, representing approximately 25.5% of the AmeriGas common units entitled to vote at the special meeting.

The approval of the merger agreement and the transactions contemplated thereby, including the merger, by the AmeriGas Unitholders is a condition to the completion of the merger and requires the affirmative vote of holders of at least a majority of the outstanding AmeriGas common units. Therefore, your vote is very important. Your failure to vote your AmeriGas common units will have the same effect as a vote “AGAINST” the approval of the merger agreement and the transactions contemplated thereby, including the merger. Neither the adjournment proposal nor the advisory compensation proposal is a condition to the obligations of AmeriGas or UGI to complete the merger.

By order of the GP Board,

 

 

LOGO

 

Monica M. Gaudiosi

Vice President, General Counsel and Secretary of AmeriGas Propane, Inc., the General Partner of AmeriGas Partners, L.P.

King of Prussia, Pennsylvania

July 12, 2019

YOUR VOTE IS IMPORTANT!

WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, WE URGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE (1) BY TELEPHONE, (2) VIA THE INTERNET OR (3) BY MARKING, SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE PREPAID ENVELOPE PROVIDED. You may revoke your proxy or change your vote at any time before the special meeting. If your AmeriGas common units are held in the name of a bank, broker or other fiduciary, please follow the instructions on the voting instruction card furnished to you by such record holder.

We urge you to read the accompanying proxy statement/prospectus, including all documents incorporated by reference into the accompanying proxy statement/prospectus, and its annexes carefully and in their entirety. If you have any questions concerning the merger, the adjournment vote, the advisory compensation vote, the special meeting or the accompanying proxy statement/prospectus or would like additional copies of the accompanying proxy statement/prospectus or need help voting your AmeriGas common units, please contact AmeriGas’ proxy solicitor:

Innisfree M&A Incorporated

Toll-free at (888) 750-5834 (AmeriGas Unitholders) or collect at (212) 750-5833 (banks and brokers).


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ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates by reference important business and financial information about UGI and AmeriGas from other documents filed with the Securities and Exchange Commission (the “SEC”) that are not included in or delivered with this proxy statement/prospectus.

Documents incorporated by reference are available to you without charge upon written or oral request. You can obtain any of these documents by requesting them in writing or by telephone from UGI or AmeriGas at: UGI Corporation, P.O. Box 858, Valley Forge, PA 19482, Attention: Secretary.

To receive timely delivery of the requested documents in advance of the special meeting, you should make your request no later than August 14, 2019.

For a more detailed description of the information incorporated by reference in this proxy statement/prospectus and how you may obtain it, see “Where You Can Find More Information.”

ABOUT THIS DOCUMENT

This document, which forms part of a registration statement on Form S-4 filed with the SEC by UGI (File No. 333-231242), constitutes a prospectus of UGI under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of common stock, with no par value, of UGI (“UGI Shares”) to be issued pursuant to the merger agreement. This document also constitutes a notice of meeting and a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with respect to the special meeting of AmeriGas Unitholders, at which AmeriGas Unitholders will be asked to consider and vote on, among other matters, a proposal to approve the merger agreement and the transactions contemplated thereby, including the merger.

You should rely only on the information contained in or incorporated by reference into this proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement/prospectus. This proxy statement/prospectus is dated July 12, 2019. The information contained in this proxy statement/prospectus is accurate only as of that date or, in the case of information in a document incorporated by reference, as of the date of such document, unless the information specifically indicates that another date applies. Neither the mailing of this proxy statement/prospectus to AmeriGas Unitholders nor the issuance by UGI of UGI Shares pursuant to the merger agreement will create any implication to the contrary.

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

The information concerning UGI contained in this proxy statement/prospectus or incorporated by reference has been provided by UGI, and the information concerning AmeriGas contained in this proxy statement/prospectus or incorporated by reference has been provided by AmeriGas.


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TABLE OF CONTENTS

 

SUMMARY

     1  

The Parties

     1  

The Merger

     1  

Merger Consideration

     1  

Treatment of Performance Units, Restricted Units, Phantom Units and AmeriGas Equity Plans

     2  

Treatment of General Partner Interest

     2  

Treatment of AmeriGas Common Units Owned by the General Partner

     3  

Treatment of AmeriGas Common Units Owned by UGI and its Subsidiaries

     3  

Recommendation of the GP Board; Reasons for the Merger

     4  

Opinion of the Financial Advisor to the GP Audit Committee

     4  

J.P. Morgan Securities LLC Financial Advisor Materials

     5  

No UGI Shareholder Approval Required

     5  

Directors and Executive Officers of UGI After the Merger

     5  

Position of the UGI Filing Parties as to the Fairness of the Merger

     5  

The UGI Filing Parties’ Reasons for the Merger

     6  

The Support Agreement

     6  

Interests of Directors and Executive Officers of the General Partner in the Merger

     6  

Interests of UGI in the Merger

     6  

Risk Factors Relating to the Merger and Ownership of AmeriGas Common Units

     6  

Material U.S. Federal Income Tax Consequences of the Merger

     7  

Accounting Treatment of the Merger

     7  

Listing of UGI Shares; Delisting and Deregistration of AmeriGas Common Units

     7  

No Dissenters’ Rights or Appraisal Rights

     8  

Conditions to Completion of the Merger

     8  

Regulatory Approvals and Clearances Required for the Merger

     8  

Comparison of Rights of UGI Shareholders and AmeriGas Unitholders

     8  

Organizational Structure Prior to and Following the Merger

     9  

Summary Historical Consolidated Financial Data of UGI

     10  

Summary Historical Consolidated Financial Data of AmeriGas

     13  

Unaudited Comparative Per Share/Unit Information

     14  

Comparative Share/Unit Prices and Distributions

     17  

Litigation Related to the Merger

     18  

SPECIAL FACTORS

     20  

Overview of Special Factors

     20  

Effect of the Merger

     20  

Background of the Merger

     21  

Unaudited Financial Projections of UGI and AmeriGas

     35  

Recommendation of the GP Audit Committee and the GP Board; Reasons for Recommending Approval of the Merger

     39  

Opinion of the Financial Advisor to the GP Audit Committee

     47  

J.P. Morgan Securities LLC Financial Advisor Materials

     70  

Position of the UGI Filing Parties as to the Fairness of the Merger

     81  

The UGI Filing Parties’ Reasons for the Merger

     83  

Primary Benefits and Detriments of the Merger

     85  

Interests of Directors and Executive Officers of the General Partner in the Merger

     86  

Interests of UGI in the Merger

     92  

No Dissenters’ Rights or Appraisal Rights

     92  

Provisions for Unaffiliated AmeriGas Unitholders

     92  

No UGI Shareholder Approval Required

     92  

Accounting Treatment of the Merger

     92  

Financing of the Merger

     93  

 

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Fees and Expenses

     95  

Litigation Related to the Merger

     95  

Directors and Executive Officers of UGI After the Merger

     96  

Listing of UGI Shares; Delisting and Deregistration of AmeriGas Common Units

     96  

Ownership of UGI After the Merger

     97  

Restrictions on Sales of UGI Shares Received in the Merger

     97  

Standby Equity Commitment Agreement

     97  

QUESTIONS AND ANSWERS

     98  

RISK FACTORS

     107  

Risk Factors Relating to the Merger

     107  

Risks Related to AmeriGas’ Business

     113  

Risks Related to UGI’s Business

     113  

Tax Risks Related to the Merger and Owning UGI Shares Received in the Merger

     113  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     115  

THE PARTIES

     117  

UGI Corporation

     117  

AmeriGas Partners, L.P.

     117  

AmeriGas Propane, Inc.

     117  

AmeriGas Propane Holdings, Inc.

     117  

AmeriGas Propane Holdings, LLC

     117  

AmeriGas, Inc.

     118  

THE SPECIAL MEETING

     119  

Date, Time and Place

     119  

Purpose

     119  

Recommendation of the GP Board

     119  

Record Date; Outstanding Units; AmeriGas Common Units Entitled to Vote

     120  

Quorum

     120  

Required Vote

     120  

Common Unit Ownership of and Voting by the General Partner’s and UGI’s Directors, Executive Officers and Affiliates

     121  

Voting of Common Units by Holders of Record

     121  

Voting of Common Units Held in Street Name

     122  

Revocability of Proxies; Changing Your Vote

     122  

Solicitation of Proxies

     123  

AmeriGas Unitholders Should Not Send Unit Certificates with Their Proxies.

     123  

No Other Business

     123  

Adjournments

     123  

Assistance

     123  

PROPOSAL 1: THE MERGER AGREEMENT

     124  

The Merger; Effective Time; Closing

     124  

Exchange and Payment Procedures

     125  

Election Procedures

     127  

Proration Procedures

     128  

Conditions to Completion of the Merger

     130  

Representations and Warranties

     132  

Conduct of Business Prior to Closing

     133  

No Solicitation by AmeriGas of Alternative Proposals

     135  

GP Audit Committee and GP Board Recommendation and AmeriGas Adverse Recommendation Change

     136  

AmeriGas Unitholder Approval

     139  

Reasonable Best Efforts to Obtain Required Approvals

     139  

Agreement to Take Further Action and to Use Reasonable Best Efforts

     139  

 

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GP Audit Committee

     139  

Treatment of AmeriGas LTIP Awards

     140  

Financing Covenant

     141  

Access to Information

     141  

Indemnification and Insurance

     141  

Certain Tax Matters

     141  

Withholding

     142  

Adjustments to Prevent Dilution

     142  

Dividends and Distributions

     142  

Section 16 Matters

     142  

Other Covenants and Agreements

     143  

Termination of the Merger Agreement

     143  

Effect of Termination; Termination Fee and Expenses

     143  

Amendment and Supplement; Waiver

     144  

Assignment

     145  

Specific Performance

     145  

Governing Law

     145  

THE SUPPORT AGREEMENT

     146  

UGI CORPORATION UNAUDITED PRO FORMA FINANCIAL INFORMATION

     147  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

     155  

Tax Consequences of the Merger to U.S. Holders

     156  

Tax Consequences to U.S. Holders of Owning and Disposing of UGI Shares Received in the Merger

     157  

Information Reporting and Backup Withholding

     158  

DESCRIPTION OF UGI SHARES

     159  

Where UGI Shares Are Traded

     159  

Quarterly Dividends

     159  

Transfer Agent and Registrar

     159  

COMMON UNIT MARKET PRICE AND DISTRIBUTION INFORMATION

     160  

Where AmeriGas Common Units Are Traded

     160  

Common Unit Market Price Information

     160  

CERTAIN PURCHASES AND SALES OF COMMON UNITS

     162  

EQUITY SECURITY OWNERSHIP

     163  

COMPARISON OF RIGHTS OF UGI SHAREHOLDERS AND AMERIGAS UNITHOLDERS

     166  

OTHER MATTERS

     181  

Householding of Special Meeting Materials

     181  

PROPOSAL 2: ADJOURNMENT OF THE SPECIAL MEETING

     182  

PROPOSAL 3: THE ADVISORY COMPENSATION PROPOSAL

     183  

LEGAL MATTERS

     184  

EXPERTS

     184  

UGI

     184  

AmeriGas

     184  

WHERE YOU CAN FIND MORE INFORMATION

     185  

UGI’s Filings (SEC File No.  001-11071)

     185  

AmeriGas’ Filings (SEC File No. 001-13692)

     186  
ANNEX A:        AGREEMENT AND PLAN OF MERGER      A-1  
ANNEX B:        OPINION OF TUDOR PICKERING HOLT & CO ADVISORS LP      B-1  
ANNEX C:        SUPPORT AGREEMENT      C-1  

 

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SUMMARY

This summary highlights selected information from this proxy statement/prospectus. You are urged to read carefully the entire proxy statement/prospectus and the other documents referred to in this proxy statement/prospectus because the information in this section does not provide all of the information that might be important to you with respect to the merger agreement, the merger and the other matters being considered at the special meeting. See “Where You Can Find More Information.” Each item in this summary refers to the page of this proxy statement/prospectus on which that subject is discussed in more detail.

The Parties (See page 117)

UGI is a Pennsylvania corporation with common stock traded on the New York Stock Exchange (the “NYSE”) under the symbol “UGI.” UGI is a holding company that, through subsidiaries and affiliates, distributes, stores, transports and markets energy products and related services. In the United States, UGI (i) indirectly owns the general partner of AmeriGas and limited partner interests in AmeriGas, a retail propane marketing and distribution business, (ii) owns and operates natural gas and electric distribution utilities and (iii) owns and operates an energy marketing, midstream infrastructure, storage, natural gas gathering, natural gas production, electricity generation and energy services business. Internationally, UGI distributes liquefied petroleum gases (“LPG”) and markets other energy products and services in Europe. Holdings is a Delaware corporation and Merger Sub is a Delaware limited liability company, each of which is an indirect, wholly owned subsidiary of UGI. The address of UGI’s, Holdings’ and Merger Sub’s principal executive offices is 460 North Gulph Road, King of Prussia, Pennsylvania 19406, and the telephone number at such address is (610) 337-1000.

AmeriGas is a Delaware limited partnership with common units traded on the NYSE under the symbol “APU.” AmeriGas is the largest retail propane distributor in the United States based on the volume of propane gallons distributed annually. AmeriGas serves over 1.7 million residential, commercial, industrial, agricultural, wholesale and motor fuel customers in all 50 states from approximately 1,900 propane distribution locations. AmeriGas is managed by the General Partner. The General Partner is a Pennsylvania corporation and an indirect, wholly owned subsidiary of UGI. The GP Board oversees, and the executive officers of the General Partner manage, AmeriGas. The address of AmeriGas’ and the General Partner’s principal executive offices is 460 North Gulph Road, King of Prussia, Pennsylvania 19406, and the telephone number at such address is (610) 337-7000.

For purposes of this proxy statement/prospectus, except where expressly provided otherwise, AmeriGas and the General Partner, and their respective subsidiaries, are not considered subsidiaries of UGI or affiliates of UGI or any of its subsidiaries.

The Merger (See page 124)

Subject to the terms and conditions of the merger agreement and in accordance with Delaware law, the merger agreement provides for the merger of Merger Sub with and into AmeriGas. AmeriGas will survive the merger and become an indirect, wholly owned subsidiary of UGI, but the AmeriGas common units will no longer be publicly traded.

Merger Consideration (See page 124)

If the merger is completed, pursuant to the merger agreement, each AmeriGas common unit issued and outstanding as of immediately prior to the completion of the merger (other than AmeriGas common units held by UGI or its subsidiaries or the General Partner) will be automatically converted into the right to receive, at the election of each AmeriGas Unitholder (an “election”), but subject to any applicable withholding tax and



 

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proration as described below, one of the following forms of consideration (collectively, the “merger consideration”):

(i) 0.6378 UGI Shares (such election, a “Share Election”; such ratio of UGI Shares received per AmeriGas common unit, the “Share Election Exchange Ratio”);

(ii)(A) $7.63 in cash, without interest, and (B) 0.500 UGI Shares (such election, a “Mixed Election”; such ratio of UGI Shares received per AmeriGas common unit, the “Mixed Election Exchange Ratio”); or

(iii) $35.325 in cash, without interest (such election, a “Cash Election”).

The merger consideration is subject to a proration (the “proration”) designed to ensure that the number of UGI Shares issuable as merger consideration will equal approximately 34,621,411 UGI Shares. AmeriGas Unitholders may elect the Share Election, the Mixed Election or the Cash Election. However, the ability for AmeriGas Unitholders to receive the merger consideration they elected will depend on the elections of other AmeriGas Unitholders. The proration of the merger consideration payable to AmeriGas Unitholders in the merger will not be known until Computershare Inc., which will act as the exchange agent for AmeriGas Unitholders during the process of exchanging their AmeriGas common units (the “Exchange Agent”), tallies the results of the elections made by AmeriGas Unitholders. This will not occur until near or after the completion of the merger. If you make no valid election with respect to your AmeriGas common units, you will receive such merger consideration as is determined in accordance with the proration provisions of the merger agreement.

AmeriGas Unitholders will not receive any fractional UGI Shares in the merger. Instead, with respect to each AmeriGas Unitholder whose AmeriGas common units are converted into UGI Shares pursuant to the merger agreement who otherwise would have received a fraction of a UGI Share will be entitled to receive cash in lieu of such fractional UGI Share.

Treatment of Performance Units, Restricted Units, Phantom Units and AmeriGas Equity Plans (See page 140)

Under the merger agreement, and subject to certain exceptions, each unvested award of a performance unit (an “AmeriGas Performance Unit”) relating to an AmeriGas common unit granted under the AmeriGas Propane, Inc. 2010 Long-Term Incentive Plan on behalf of AmeriGas Partners, L.P., as amended, and any other plans or arrangements of AmeriGas or the General Partner providing for the grant of awards of AmeriGas common units or awards valued by reference to AmeriGas common units (collectively, the “AmeriGas LTIPs”), outstanding immediately prior to the completion of the merger will, as of the effective time of the merger, automatically, without any action on the part of the holder thereof, be cancelled and converted into a number of cash-settled performance-based restricted stock units relating to UGI Shares determined by multiplying the number of AmeriGas Performance Units subject to such award by the number of UGI Shares as comprises the Share Consideration (as defined below in “Proposal 1: The Merger Agreement—The Merger; Effective Time; Closing”) and will be subject to the same performance-based vesting conditions as applied before the merger. For additional information regarding the treatment of all outstanding awards related to an AmeriGas common unit issued under the AmeriGas LTIPs, and the treatment of the AmeriGas LTIPs, see “Special Factors—Interests of Directors and Executive Officers of the General Partner in the Merger” and “Proposal 1: The Merger Agreement—Treatment of AmeriGas LTIP Awards.”

Treatment of General Partner Interest (See page 125)

The merger agreement provides that, at the completion of the merger, the General Partner’s 1% economic general partner interest in AmeriGas, which includes its incentive distribution rights, will convert into (i) 10,615,711 AmeriGas common units, which will remain outstanding as partnership interests in AmeriGas, and (ii) a non-economic general partner interest in AmeriGas.



 

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Treatment of AmeriGas Common Units Owned by the General Partner (See page 125)

The merger agreement provides that, at the completion of the merger, the AmeriGas common units owned by the General Partner that are issued and outstanding immediately prior to the completion of the merger will be unaffected by the merger and will remain outstanding as partnership interests in AmeriGas.

Treatment of AmeriGas Common Units Owned by UGI and its Subsidiaries (See page 125)

The merger agreement provides that, at the completion of the merger, any AmeriGas common units owned by UGI and its subsidiaries (and for the sake of clarity, excluding the AmeriGas common units owned by the General Partner) that are issued and outstanding immediately prior to the completion of the merger will be automatically cancelled and will cease to exist, with no consideration being paid thereon.

Required Vote (See page 122)

To approve the merger agreement and the transactions contemplated thereby, including the merger, the holders of at least a majority of the outstanding AmeriGas common units must vote in favor of such approval. AmeriGas cannot complete the merger unless the AmeriGas Unitholders approve the merger agreement and the transactions contemplated thereby. Because approval is based on the affirmative vote of at least a majority of the outstanding AmeriGas common units, an AmeriGas Unitholder’s failure to vote, an abstention from voting or the failure of an AmeriGas Unitholder who holds his/her units in “street name” through a bank, broker or other nominee to give voting instructions to such bank, broker or other nominee (referred to herein as a “broker non-vote”) will have the same effect as a vote “AGAINST” approval of the merger proposal.

If a quorum is present at the special meeting, to approve the adjournment of the meeting, if necessary, to solicit additional proxies if there are not sufficient votes to approve the merger agreement and the transactions contemplated thereby, including the merger, at the time of the special meeting, holders of at least a majority of the outstanding AmeriGas common units must vote in favor of the adjournment proposal. Therefore, if a quorum is present at the meeting, an AmeriGas Unitholder’s failure to vote, an abstention from voting or a broker non-vote will have the same effect as a vote “AGAINST” approval of the adjournment proposal. If a quorum is not present at the special meeting, to approve the adjournment of the meeting, holders of at least a majority of the outstanding AmeriGas common units represented thereat either in person or by proxy must vote in favor of the adjournment proposal. Therefore, if a quorum is not present, an abstention will have the same effect as a vote “AGAINST” approval of the adjournment proposal, but an AmeriGas Unitholder’s failure to vote or a broker non-vote will have no effect on the approval of the adjournment proposal. For more information on broker non-votes, see “Question and Answers—Q: If my AmeriGas common units are held in “street name” by my broker, will my broker automatically vote my AmeriGas common units for me?” Approval of the adjournment proposal is not required for AmeriGas to complete the merger.

To approve the advisory compensation proposal, the holders of at least a majority of the outstanding AmeriGas common units must vote in favor of such approval. Because approval is based on the affirmative vote of at least a majority of the outstanding AmeriGas common units, an AmeriGas Unitholder’s failure to vote, an abstention from voting or a broker non-vote will have the same effect as a vote “AGAINST” the advisory compensation proposal. The advisory compensation proposal is a non-binding vote, and as such, approval of the advisory compensation proposal is not required for AmeriGas to complete the merger.

Common Unit Ownership of and Voting by the General Partners and UGIs Directors, Executive Officers and Affiliates (See page 121)

As of July 1, 2019, the General Partner’s directors and executive officers and their affiliates (excluding UGI and its other subsidiaries) beneficially owned and had the right to vote 144,731 AmeriGas common units at the



 

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special meeting, which represent approximately 0.16% of the AmeriGas common units entitled to vote at the special meeting. UGI’s directors and executive officers and their affiliates (including UGI and its subsidiaries, other than the General Partner) beneficially owned and had the right to vote 76,491 AmeriGas common units at the special meeting, which represent approximately 0.08% of the AmeriGas common units entitled to vote at the special meeting. It is expected that the General Partner’s and UGI’s directors and executive officers will vote their AmeriGas common units “FOR” the approval of the merger agreement and the transactions contemplated thereby, including the merger, although none of them have entered into any agreement requiring them to do so. Additionally, pursuant to the Support Agreement, the General Partner, which owns the general partner interest in AmeriGas, including the incentive distribution rights, has agreed to vote all of the AmeriGas common units owned beneficially or of record by it “FOR” the approval of the merger agreement and the transactions contemplated thereby, including the merger, and the approval of any actions necessary or desirable in furtherance thereof, which includes the advisory compensation proposal and, if necessary, the adjournment proposal.

Recommendation of the GP Board; Reasons for the Merger (See page 39)

The GP Board, based on a number of factors, including the recommendation of the GP Audit Committee, recommends that AmeriGas Unitholders vote “FOR” the approval of the merger agreement and the transactions contemplated thereby, including the merger.

In the course of reaching their decisions to approve the merger agreement and the transactions contemplated by the merger agreement, the GP Audit Committee and the GP Board considered a number of factors in their deliberations. For a more complete discussion of these factors, see “Special Factors—Recommendation of the GP Audit Committee and the GP Board; Reasons for Recommending Approval of the Merger.”

Opinion of the Financial Advisor to the GP Audit Committee (See page 47)

At the request of the GP Audit Committee, at a meeting of the GP Audit Committee held on April 1, 2019, Tudor Pickering Holt & Co Advisors LP (“TPH”) rendered its oral opinion to the GP Audit Committee that, as of April 1, 2019, based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations of the review undertaken by TPH in connection with the preparation of its opinion as set forth therein, the Merger Consideration (as defined in “Special Factors—Opinion of the Financial Advisor to the GP Audit Committee”) to be paid to the Unaffiliated AmeriGas Unitholders in the merger pursuant to the merger agreement was fair from a financial point of view to such Unaffiliated AmeriGas Unitholders. TPH subsequently confirmed its oral opinion in writing, dated April 1, 2019, to the GP Audit Committee.

TPH’s opinion was directed to the GP Audit Committee (in its capacity as such), and only addressed the fairness from a financial point of view, as of the date of the opinion, to the Unaffiliated AmeriGas Unitholders of the Merger Consideration to be paid to such Unaffiliated AmeriGas Unitholders in the merger pursuant to the merger agreement. TPH’s opinion did not address any other term, aspect or implication of the merger agreement or other transactions contemplated thereby, including the merger. The full text of TPH’s opinion, which describes, among other things, the assumptions made, procedures followed, matters considered, and qualifications and limitations of the review undertaken by TPH in rendering its opinion, is attached as Annex B to this proxy statement/prospectus. The summary of TPH’s opinion set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion. The Unaffiliated AmeriGas Unitholders are urged to read TPH’s opinion carefully and in its entirety. However, neither TPH’s written opinion nor the summary of such opinion and the related analyses set forth in this proxy statement/prospectus are intended to be, and they do not constitute, a recommendation to the holders of AmeriGas common units or any other persons in respect of the merger, including as to how any Unaffiliated AmeriGas Unitholders or any other holders of AmeriGas common units should vote or act with respect to the merger or any other matter.



 

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See “Special Factors—Opinion of the Financial Advisor to the GP Audit Committee.”

J.P. Morgan Securities LLC Financial Advisor Materials (See page 70)

In connection with the proposed transaction, the UGI Board received, on April 1, 2019, an oral opinion from J.P. Morgan Securities LLC (“J.P. Morgan”), which was subsequently confirmed in writing, stating, as of the date of the opinion and based upon and subject to the assumptions, qualifications, limitations and other matters stated therein, that the merger consideration to be paid by UGI in the merger pursuant to the merger agreement is fair, from a financial point of view, to UGI.

J.P. Morgan’s opinion was provided for the information of the UGI Board in connection with its evaluation of the merger consideration to be paid by UGI from a financial point of view and did not address any other aspects or implications of the proposed transaction. J.P. Morgan expressed no view as to, and its opinion does not in any manner address, the underlying business decision to proceed with or effect the merger, the likelihood of completion of the merger or the relative merits of the merger as compared to any other transaction or business strategy in which UGI might engage. In addition, J.P. Morgan expressed no view as to, and its opinion does not in any manner address, the fairness of the amount or the nature of any compensation to any officers, directors or employees of any parties to the proposed transaction, or any class of such persons, relative to the merger consideration to be offered to the Unaffiliated AmeriGas Unitholders in the proposed transaction or otherwise. J.P. Morgan’s opinion is not intended to be and does not constitute a recommendation to any Unaffiliated AmeriGas Unitholder as to how such Unaffiliated AmeriGas Unitholder should vote or act with respect to the merger or any other matter.

See “Special Factors—J.P. Morgan Securities LLC Financial Advisor Materials.”

No UGI Shareholder Approval Required (See page 92)

Current holders of UGI Shares (“UGI Shareholders”) are not required to approve the merger agreement or approve the merger or the issuance of UGI Shares in connection with the merger.

Directors and Executive Officers of UGI After the Merger (See page 96)

UGI expects that the directors and executive officers of UGI immediately prior to the merger will continue in their existing director and management roles, as applicable, of UGI after the merger.

Position of the UGI Filing Parties as to the Fairness of the Merger (See page 81)

The “UGI Filing Parties” means (i) UGI, (ii) Holdings, (iii) Merger Sub, (iv) the General Partner and (v) AmeriGas, Inc., a Pennsylvania corporation (“AGI”). The UGI Filing Parties believe that the merger is substantively and procedurally fair to the Unaffiliated AmeriGas Unitholders. However, none of the UGI Filing Parties nor any of their respective affiliates (other than the GP Audit Committee) has performed, or engaged a financial advisor to perform, any valuation or other analysis for purposes of assessing the fairness of the merger to AmeriGas and the Unaffiliated AmeriGas Unitholders. The belief of the UGI Filing Parties as to the procedural and substantive fairness of the merger is based on the factors discussed in “Special Factors—Position of the UGI Filing Parties as to the Fairness of the Merger.”



 

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The UGI Filing Parties’ Reasons for the Merger (See page 83)

In the course of reaching its decision to approve the merger agreement and the transactions contemplated thereby, including the merger, the UGI board of directors (the “UGI Board”) and the UGI Filing Parties considered a number of factors in its deliberations. Those factors are described in “Special Factors—The UGI Filing Parties’ Reasons for the Merger.”

The Support Agreement (See page 146)

Simultaneously with the execution of the merger agreement, the General Partner and AmeriGas entered into the Support Agreement. Pursuant to the Support Agreement, the General Partner has agreed to vote all of the AmeriGas common units owned beneficially or of record by it “FOR” the approval of the merger agreement and the transactions contemplated thereby, including the merger, and the approval of any actions necessary or desirable in furtherance thereof, which includes the advisory compensation proposal and, if necessary, the adjournment proposal. As of July 1, 2019, the General Partner held 23,756,882 AmeriGas common units, representing approximately 25.5% of the AmeriGas common units entitled to vote at the special meeting. In addition, the General Partner has agreed to retain, or cause its subsidiaries to retain, subject to certain limited exceptions, beneficial or record ownership of the AmeriGas common units such entity held as of April 1, 2019, and any that such entity obtains thereafter, until the termination of the Support Agreement. In the event that the General Partner or any of its subsidiaries becomes the holder of record or beneficial owner of additional AmeriGas common units, the General Partner will notify AmeriGas and such additional AmeriGas common units will become subject to the foregoing restrictions in the Support Agreement. Pursuant to the merger agreement, UGI and its affiliates are required to enter into the Support Agreement by execution of a joinder thereto if at any time prior to the vote of the AmeriGas common units in respect of the merger agreement UGI or its affiliates acquire beneficial or direct ownership of any AmeriGas common units. A copy of the Support Agreement is attached as Annex C to this proxy statement/prospectus.

Interests of Directors and Executive Officers of the General Partner in the Merger (See page 86)

The General Partner’s directors and executive officers have interests in the merger that are different from, or in addition to, the interests of AmeriGas Unitholders generally. The members of the GP Board and the GP Audit Committee were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending to AmeriGas Unitholders that the merger agreement be approved. See “Special Factors—Interests of Directors and Executive Officers of the General Partner in the Merger.”

Interests of UGI in the Merger (See page 92)

UGI indirectly owns the General Partner, and controls AmeriGas through the General Partner, which owns the general partner interest in AmeriGas, including the incentive distribution rights, as well as approximately 25.5% of the outstanding AmeriGas common units. UGI has different economic interests in the merger than AmeriGas Unitholders generally due to, among other things, UGI’s indirect ownership of the general partner interest in AmeriGas, including the incentive distribution rights, prior to the merger and the fact that UGI is the ultimate acquiring entity in the merger.

Risk Factors Relating to the Merger and Ownership of AmeriGas Common Units (See page 107)

AmeriGas Unitholders should consider carefully all of the risk factors together with all of the other information included or incorporated by reference in this proxy statement/prospectus before deciding how to vote. Risks relating to the merger and ownership of UGI Shares are described in the section titled “Risk Factors.”



 

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Material U.S. Federal Income Tax Consequences of the Merger (See page 155)

The receipt of merger consideration in exchange for AmeriGas common units pursuant to the merger will be a taxable transaction to U.S. Holders (as defined in “Material U.S. Federal Income Tax Consequences of the Merger”) for U.S. federal income tax purposes. Generally, a U.S. Holder who exchanges AmeriGas common units pursuant to the merger will recognize gain or loss in an amount equal to the difference between:

 

   

the sum of (i) the amount of cash received, (ii) the fair market value of the UGI Shares received, if any, and (iii) such U.S. Holder’s share of AmeriGas’ nonrecourse liabilities immediately prior to the merger; and

 

   

such U.S. Holder’s adjusted tax basis in the AmeriGas common units exchanged therefor (which tax basis includes the U.S. Holder’s share of AmeriGas’ nonrecourse liabilities immediately prior to the merger).

Gain or loss recognized by a U.S. Holder will generally be taxable as capital gain or capital loss. However, a portion of this gain or loss, which could be substantial, will be separately computed and taxed as ordinary income or ordinary loss to the extent attributable to “unrealized receivables,” including depreciation recapture, or to “inventory items” owned by AmeriGas and its subsidiaries. Passive losses that were not deductible by a U.S. Holder in prior taxable periods because they exceeded the U.S. Holder’s share of AmeriGas’ income may become available to offset a portion of the gain recognized by such U.S. Holder.

The U.S. federal income tax consequences of the merger to an AmeriGas Unitholder and of the ownership and disposition of any UGI Shares received pursuant thereto will depend on the AmeriGas Unitholder’s particular tax situation. Accordingly, you are strongly urged to consult your tax advisor for a full understanding of the particular tax consequences to you of the merger and of the ownership and disposition of any UGI shares received by you in the merger.

See “Material U.S. Federal Income Tax Consequences of the Merger” for a more complete discussion of U.S. federal income tax consequences of the merger.

Accounting Treatment of the Merger (See page 92)

The merger will be accounted for in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) 810, Consolidation—Overall-Changes in a Parent’s Ownership Interest in a Subsidiary. UGI controls AmeriGas through its indirect ownership of the General Partner, and UGI’s financial statements include the consolidation of AmeriGas. Because UGI controls AmeriGas before and after the merger, the changes in UGI’s ownership interest in AmeriGas resulting from the merger will be accounted for as an equity transaction and no gain or loss will be recognized in UGI’s consolidated income statement resulting from the merger. In addition, the carrying amounts of AmeriGas’ assets and liabilities will not be adjusted. Finally, the tax effects of the merger will be reported as adjustments to deferred income taxes and UGI stockholders’ equity consistent with ASC 740, Income Taxes.

Listing of UGI Shares; Delisting and Deregistration of AmeriGas Common Units (See page 96)

UGI Shares are currently listed on the NYSE under the ticker symbol “UGI.” It is a condition to closing that the UGI Shares to be issued in the merger to AmeriGas Unitholders be approved for listing on the NYSE, subject to official notice of issuance.

AmeriGas common units are currently listed on the NYSE under the ticker symbol “APU.” If the merger is completed, AmeriGas common units will cease to be listed on the NYSE and will be deregistered under the Exchange Act.



 

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No Dissenters’ Rights or Appraisal Rights (See page 92)

Neither dissenters’ rights nor appraisal rights are available in connection with the merger under the Delaware Revised Uniform Limited Partnership Act, as amended (the “DRULPA”), the merger agreement or the Fourth Amended and Restated Agreement of Limited Partnership of AmeriGas Partners, L.P., dated as of July 27, 2009, as amended (the “AmeriGas partnership agreement”). For more information, see “Special Factors—No Dissenters’ Rights or Appraisal Rights.”

Conditions to Completion of the Merger (See page 130)

UGI and AmeriGas may not complete the merger until certain conditions contained in the merger agreement are satisfied or waived, including the approval of Proposal 1: The Merger Agreement at the special meeting by AmeriGas Unitholders holding a majority of the outstanding AmeriGas common units (the “AmeriGas Unitholder Approval”). For more information on all of the conditions to completion of the merger contained in the merger agreement, see “Proposal 1: The Merger Agreement—Conditions to Completion of the Merger.”

Regulatory Approvals and Clearances Required for the Merger (See page 130)

Completion of the merger is not subject to any state or federal regulatory approvals or clearances.

Comparison of Rights of UGI Shareholders and AmeriGas Unitholders (See page 166)

AmeriGas Unitholders may own UGI Shares following the completion of the merger, and their rights associated with those UGI Shares will be governed by UGI’s bylaws, which differ in a number of respects from the AmeriGas partnership agreement, and the Pennsylvania Business Corporation Law of 1988, as amended (the “PBCL”).



 

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Organizational Structure Prior to and Following the Merger

The following represents the simplified organizational structure of UGI and AmeriGas prior to the merger:

 

 

LOGO

 

(1)

23,756,882 AmeriGas common units as of July 1, 2019.

(2)

69,242,822 AmeriGas common units as of July 1, 2019.



 

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The following represents the simplified organizational structure of UGI and AmeriGas following the completion of the merger:

 

 

LOGO

Summary Historical Consolidated Financial Data of UGI

The following summary historical consolidated balance sheet data as of September 30, 2018, 2017, 2016, 2015 and 2014 and the summary historical consolidated statement of income data for the fiscal years ended September 30, 2018, 2017, 2016, 2015 and 2014 are derived from UGI’s audited historical consolidated financial statements. The summary historical consolidated balance sheet data as of March 31, 2019 and 2018 and the statement of income data for the six months ended March 31, 2019 and 2018 are derived from UGI’s unaudited historical consolidated financial statements. The unaudited historical consolidated financial statements of UGI include the accounts of UGI and its controlled subsidiary companies which, except for AmeriGas, are majority owned. UGI reports the public’s interests in AmeriGas, and outside ownership interests in other consolidated but less than 100% owned subsidiaries, as noncontrolling interests.



 

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You should read the following summary historical consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto set forth in UGI’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018, as updated in its Current Report on Form 8-K, filed on May 6, 2019, and Quarterly Report on Form 10-Q for the six months ended March 31, 2019, which are incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information.”

 

    Six Months Ended
March 31,
    Year Ended
September 30,
 
(Millions of dollars, except per share and ratio amounts)   2019     2018     2018 (a)     2017     2016     2015     2014  

FOR THE PERIOD:

             

Income statement data:

             

Revenues

  $ 4,806.3     $ 4,937.2     $ 7,651.2     $ 6,120.7     $ 5,685.7     $ 6,691.1     $ 8,277.3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income including noncontrolling interests

  $ 485.2     $ 841.9     $ 822.4     $ 523.8     $ 488.8     $ 414.0     $ 532.6  

Deduct net income attributable to noncontrolling interests, principally in AmeriGas

    (175.6     (200.0     (103.7     (87.2     (124.1     (133.0     (195.4
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to UGI Corporation

  $ 309.6     $ 641.9     $ 718.7     $ 436.6     $ 364.7     $ 281.0     $ 337.2  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share attributable to UGI stockholders:

             

Basic

  $ 1.77     $ 3.70     $ 4.13     $ 2.51     $ 2.11     $ 1.62     $ 1.95  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

  $ 1.74     $ 3.63     $ 4.06     $ 2.46     $ 2.08     $ 1.60     $ 1.92  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash dividends declared per common share

  $ 0.52     $ 0.50     $ 1.020     $ 0.975     $ 0.930     $ 0.890     $ 0.791  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

AT PERIOD END:

             

Balance sheet data:

             

Total assets

  $ 12,350.9     $ 12,445.3     $ 11,980.9     $ 11,582.2     $ 10,847.2     $ 10,514.2     $ 10,062.7  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capitalization:

             

Debt:

             

Short-term debt:

             

AmeriGas Propane

  $ 236.0     $ 154.5     $ 232.0     $ 140.0     $ 153.2     $ 68.1     $ 109.0  

UGI International (b)

    —         3.3       1.4       17.9       0.5       0.6       8.0  

Midstream & Marketing

    —         10.0       2.0       39.0       25.5       49.5       7.5  

UGI Utilities

    105.0       135.0       189.5       170.0       112.5       71.7       86.3  

Long-term debt (including current maturities):

             

AmeriGas Propane

    2,569.5       2,572.4       2,569.6       2,572.3       2,333.6       2,261.9       2,266.1  

UGI International

    740.0       862.7       748.5       838.8       779.6       774.2       562.8  

Midstream & Marketing

    0.4       0.5       —         —         —         —         —    

UGI Utilities

    983.3       834.1       838.0       751.1       671.5       619.8       639.5  

Other

    8.6       9.1       9.2       9.9       10.8       11.5       12.1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total debt

    4,642.8       4,581.6       4,590.2       4,539.0       4,087.2       3,857.3       3,691.3  

UGI stockholders’ equity

    3,853.0       3,774.3       3,681.4       3,163.3       2,844.1       2,685.2       2,659.1  

Noncontrolling interests, principally in AmeriGas

    463.0       646.7       418.6       577.6       750.9       880.4       1,004.1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total capitalization

  $ 8,958.8     $ 9,002.6     $ 8,690.2     $ 8,279.9     $ 7,682.2     $ 7,422.9     $ 7,354.5  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratio of capitalization:

             

Total debt

    51.8     50.9     52.8     54.8     53.2     52.0     50.2

UGI stockholders’ equity

    43.0     41.9     42.4     38.2     37.0     36.2     36.2

Noncontrolling interests, principally in AmeriGas

    5.2     7.2     4.8     7.0     9.8     11.8     13.6
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    100.0     100.0     100.0     100.0     100.0     100.0     100.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a)

Fiscal 2018 results include impacts from the Tax Cuts and Jobs Act (“TCJA”) in the U.S.

(b)

Short-term borrowings at UGI International as of December 31, 2017 primarily comprise bank overdrafts at UGI France SAS.



 

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    Six Months Ended
March 31,
    Year Ended September 30,  
(Millions of dollars, except per share amounts)       2019             2018         2018     2017     2016     2015     2014  

Non-GAAP Reconciliation:

             

Adjusted net income attributable to UGI Corporation:

             

Net income attributable to UGI

  $ 309.6     $ 641.9     $ 718.7     $ 436.6     $ 364.7     $ 281.0     $ 337.2  

Net losses (gains) on commodity derivative instruments not associated with current-period transactions (net of tax of $(36.4), $(6.0), $26.7, $31.9, $13.5, $(30.9) and $(4.5), respectively) (a) (b)

    92.7       11.1       (68.1     (51.2     (29.9     53.3       6.6  

Unrealized (gains) losses on foreign currency derivative instruments (net of tax of $3.7, $(0.7), $9.3, $(9.9), $0, $0 and $0) (a)

    (9.0     1.4       (19.6     13.9       —         —         —    

Loss on extinguishments of debt (net of tax of $(1.9), $0, $0, $(6.1), $(5.0), $0 and $0, respectively) (a)

    4.2       —         —         9.6       7.9       —         —    

Integration and acquisition expenses associated with Finagaz acquired on May 29, 2015 (net of tax of $0, $(5.2), $(12.0), $(13.7), $(10.6), $(7.7) and $(2.2), respectively) (a)

    —         8.0       18.5       26.2       17.3       14.9       4.3  

Impairment of AmeriGas’ tradenames and trademarks (net of tax of $0, $0, $(5.8), $0, $0, $0 and $0, respectively) (a)

    —         —         14.5       —         —         —         —    

Impact from change in French tax rate

    —         (13.6     (12.1     (29.0     —         —         —    

Remeasurement impact from TCJA

    —         (171.3     (166.3     —         —         —         —    

Costs associated with extinguishment of debt (net of tax of $0, $0, $0, $0, $0, $(5.7) and $0, respectively) (a) (c)

    —         —         —         —         —         4.6       —    

Impact of retroactive change in French tax law

    —         —         —         —         —         —         5.7  

Merger expenses (net of tax of $(0.1))

    0.2       —         —         —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income attributable to UGI (d)

  $ 397.7     $ 477.5     $ 485.6     $ 406.1     $ 360.0     $ 353.8     $ 353.8  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted diluted earnings per share:

             

UGI earnings per share—diluted

  $ 1.74     $ 3.63     $ 4.06     $ 2.46     $ 2.08     $ 1.60     $ 1.92  

Net losses (gains) on commodity derivative instruments not associated with current-period transactions (b)

    0.53       0.06       (0.39     (0.29     (0.17     0.30       0.04  

Unrealized (gains) losses on foreign currency derivative instruments

    (0.05     0.01       (0.11     0.08       —         —         —    

Loss on extinguishments of debt

    0.02       —         —         0.05       0.04       —         —    

Integration and acquisition expenses associated with Finagaz acquired on May 29, 2015

    —         0.05       0.10       0.15       0.10       0.08       0.03  

Impairment of Partnership tradenames and trademarks

    —         —         0.08       —         —         —         —    

Impact from change in French tax rate

    —         (0.08     (0.07     (0.16     —         —         —    

Remeasurement impact from TCJA

    —         (0.97     (0.93     —         —         —         —    

Costs associated with extinguishment of debt

    —         —         —         —         —         0.03       —    

Impact of retroactive change in French tax law

    —         —         —         —         —         —         0.03  

Merger expenses

    —         —         —         —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted diluted earnings per share (d)

  $ 2.24     $ 2.70     $ 2.74     $ 2.29     $ 2.05     $ 2.01     $ 2.02  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a)

Income taxes associated with pre-tax adjustments determined using statutory business unit tax rates.

(b)

Includes the effects of rounding.

(c)

Costs associated with extinguishment of debt in fiscal year 2015 are included in “Interest expense” on the consolidated statements of income.

(d)

UGI’s management uses “adjusted net income attributable to UGI” and “adjusted diluted earnings per share,” neither of which is a measure of performance or financial condition under accounting principles generally accepted in the United States of America (“GAAP”), when evaluating UGI’s overall performance. Adjusted net income attributable to UGI is net income attributable to UGI after excluding (1) net after-tax gains and losses on commodity and certain foreign currency derivative instruments not associated with current-period transactions (principally comprising changes in unrealized gains and losses on such derivative instruments); (2) Finagaz integration and acquisition expenses; (3) losses on extinguishments of debt; (4) impairment of AmeriGas tradenames and trademarks; (5) remeasurement impacts on deferred income tax balances resulting from the TCJA in the U.S. and changes in French tax rates and tax law; and (6) merger expenses.

Non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute for, the comparable GAAP measures. UGI management believes that these non-GAAP measures provide meaningful information to investors about UGI’s performance because they eliminate the impact of gains and losses on commodity and certain foreign currency derivative instruments not associated with current-period transactions and other significant discrete items that can affect the comparison of period-over-period results.



 

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Summary Historical Consolidated Financial Data of AmeriGas

The following summary historical consolidated balance sheet data as of September 30, 2018, 2017, 2016, 2015 and 2014 and the summary historical consolidated statement of operations data for the fiscal years ended September 30, 2018, 2017, 2016, 2015 and 2014 are derived from AmeriGas’ audited historical consolidated financial statements. The summary historical consolidated balance sheet data as of March 31, 2019 and 2018 and the statement of operations data for the six months ended March 31, 2019 and 2018 are derived from AmeriGas’ unaudited historical consolidated financial statements.

You should read the following summary historical consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto set forth in AmeriGas’ Annual Report on Form 10-K for the fiscal year ended September 30, 2018 and Quarterly Report on Form 10-Q for the six months ended March 31, 2019, which are incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information.”

 

    Six Months Ended
March 31,
    Year Ended
September 30,
 
(Millions of dollars, except ratio amounts)       2019             2018         2018     2017     2016     2015     2014  

FOR THE PERIOD:

             

Income statement data:

             

Revenues

  $ 1,791.8     $ 1,827.6     $ 2,823.0     $ 2,453.5     $ 2,311.8     $ 2,885.3     $ 3,712.9  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income including noncontrolling interest

  $ 267.1     $ 300.0     $ 194.0     $ 165.9     $ 211.2     $ 215.0     $ 294.4  

Less: net income attributable to noncontrolling interest

    (3.5     (3.8     (3.5     (3.8     (4.2     (3.8     (4.5
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to AmeriGas

  $ 263.6     $ 296.2     $ 190.5     $ 162.1     $ 207.0     $ 211.2     $ 289.9  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Limited partners’ interest in net income attributable to AmeriGas

  $ 238.1     $ 270.6     $ 143.3     $ 116.9     $ 166.8     $ 178.7     $ 263.1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income per limited partner unit—basic and diluted (a)

  $ 2.24     $ 2.41     $ 1.54     $ 1.25     $ 1.77     $ 1.91     $ 2.82  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash distributions declared per limited partner unit

  $ 1.90     $ 1.90     $ 3.80     $ 3.78     $ 3.72     $ 3.60     $ 3.44  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

AT PERIOD END:

             

Balance sheet data:

             

Current assets

  $ 536.0     $ 551.5     $ 451.9     $ 413.8     $ 344.4     $ 366.4     $ 505.9  

Total assets

  $ 3,981.9     $ 4,141.0     $ 3,925.8     $ 4,059.3     $ 4,057.8     $ 4,120.2     $ 4,338.5  

Current liabilities (excluding debt)

  $ 414.8     $ 406.1     $ 437.4     $ 433.1     $ 426.8     $ 468.5     $ 496.9  

Total debt

  $ 2,805.5     $ 2,726.9     $ 2,801.6     $ 2,712.3     $ 2,487.0     $ 2,330.0     $ 2,375.1  

Partners’ capital

             

AmeriGas capital

  $ 599.4     $ 843.2     $ 536.6     $ 747.9     $ 984.2     $ 1,164.2     $ 1,322.5  

Noncontrolling interest

    33.7       36.2       33.1       35.2       35.0       36.2       38.4  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total partners’ capital

  $ 633.1     $ 879.4     $ 569.7     $ 783.1     $ 1,019.2     $ 1,200.4     $ 1,360.9  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OTHER DATA:

             

Capital expenditures

  $ 56.8     $ 47.2     $ 101.3     $ 98.2     $ 101.7     $ 102.0     $ 113.9  

Retail propane gallons sold (millions)

    693.9       703.5       1,081.3       1,046.9       1,065.5       1,184.3       1,275.6  

Degree days — % colder (warmer) than normal (b)

    4.6     (0.9 )%      0.3     (11.3 )%      (12.4 )%      0.2     9.5

Distributable Cash Flow (“DCF”) (c):

             

DCF

      $ 389.3     $ 333.0     $ 331.9     $ 399.9     $ 430.9  

DCF after growth capital expenditures

      $ 341.0     $ 286.9     $ 282.3     $ 355.7     $ 387.2  

Total distributions paid

      $ 402.6     $ 398.9     $ 387.7     $ 368.4     $ 346.7  

Ratio of DCF to total distributions paid

        1.0       0.8       0.9       1.1       1.2  

Ratio of DCF after growth capital expenditures to total distributions paid

        0.8       0.7       0.7       1.0       1.1  

 

(a)

Calculated in accordance with accounting guidance regarding the application of the two-class method for determining earnings per share as it relates to master limited partnerships.

(b)

Deviation from average heating degree days for the 15-year period of 2002-2016 based upon national weather statistics provided by the National Oceanic and Atmospheric Administration for 344 geo regions in the United States, excluding Alaska and Hawaii.



 

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(c)

The following table reconciles net cash provided by operating activities to (1) DCF and (2) DCF after growth capital expenditures:

 

     Year Ended September 30,  
(Millions of dollars, except ratio amounts)    2018     2017     2016     2015     2014  

Net cash provided by operating activities

   $ 410.3     $ 356.8     $ 422.9     $ 523.9     $ 480.1  

Exclude the impact of changes in operating working capital:

          

Accounts receivable

     22.8       35.1       (4.0     (51.6     15.2  

Inventories

     13.8       37.4       (15.5     (86.2     22.8  

Accounts payable

     (18.6     (26.3     5.3       53.0       16.6  

Other current assets

     0.4       8.7       (3.9     10.9       (2.4

Other current liabilities

     26.5       14.4       (7.6     8.8       (11.0

Provision for uncollectible accounts

     (14.0     (17.7     (11.2     (15.8     (26.4

Other cash flows from operating activities, net

     1.1       (23.4     (2.0     14.7       6.3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     442.3       385.0       384.0       457.7       501.2  

Maintenance capital expenditures (i)

     (53.0     (52.0     (52.1     (57.8     (70.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

DCF (ii) (A)

     389.3       333.0       331.9       399.9       430.9  

Growth capital expenditures (i)

     (48.3     (46.1     (49.6     (44.2     (43.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

DCF after growth capital expenditures (ii) (B)

   $ 341.0     $ 286.9     $ 282.3     $ 355.7     $ 387.2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Distributions:

          

Distributions to AmeriGas Unitholders

   $ 353.3     $ 351.4     $ 345.6     $ 334.4     $ 319.4  

Distributions to the General Partner

     49.3       47.5       42.1       34.0       27.3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions paid (C)

   $ 402.6     $ 398.9     $ 387.7     $ 368.4     $ 346.7  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratio of DCF to total distributions paid (A)/(C)

     1.0       0.8       0.9       1.1       1.2  

Ratio of DCF after growth capital expenditures to total distributions paid (B)/(C)

     0.8       0.7       0.7       1.0       1.1  

 

  (i)

AmeriGas considers maintenance capital expenditures to include those capital expenditures that maintain the operating capacity of AmeriGas while growth capital expenditures include capital expenditures that increase the operating capacity of AmeriGas.

  (ii)

“DCF” and “DCF after growth capital expenditures” should not be considered as alternatives to net income (as an indicator of operating performance) or alternatives to cash flow (as a measure of liquidity or ability to service debt obligations) and are non-GAAP measures. AmeriGas’ management believes DCF and DCF after growth capital expenditures are meaningful non-GAAP measures for evaluating AmeriGas’ ability to declare and pay distributions pursuant to the terms of the AmeriGas partnership agreement. AmeriGas’ definitions of DCF and DCF after growth capital expenditures may be different from those used by other companies. The ability of AmeriGas to pay distributions on all AmeriGas common units depends upon a number of factors. These factors include (1) the level of AmeriGas earnings; (2) the cash needs of AmeriGas’ operations (including cash needed for maintaining and increasing operating capacity); (3) changes in operating working capital; and (4) AmeriGas’ ability to borrow under its credit agreement, to refinance maturing debt and to increase its long-term debt. Some of these factors are affected by conditions beyond our control including weather, competition in markets AmeriGas serves, the cost of propane and changes in capital market conditions.

Unaudited Comparative Per Share/Unit Information

The table below sets forth historical and unaudited pro forma combined per share/unit information of UGI and AmeriGas.

Historical Per Share/Unit Information of UGI and AmeriGas

The historical per share/unit information of UGI and AmeriGas set forth in the table below is derived from the unaudited consolidated financial statements as of and for the six months ended March 31, 2019 as well as the audited consolidated financial statements as of and for the year ended September 30, 2018 for each of UGI and AmeriGas.

Pro Forma Combined Per Share Information of UGI

The unaudited pro forma combined per share information of UGI set forth in the table below gives effect to the merger as if the merger had been completed on October 1, 2017, in the case of net income per share and dividends data, and March 31, 2019, in the case of book value per share data, and, in each case, assuming that a



 

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number of UGI Shares equal to 34,621,411 have been issued in exchange for 69,242,822 outstanding AmeriGas common units. The unaudited pro forma combined per share information of UGI is derived from the unaudited consolidated financial statements as of and for the six months ended March 31, 2019 for each of UGI and AmeriGas, as well as the audited consolidated financial statements as of and for the fiscal year ended September 30, 2018 for each of UGI and AmeriGas.

Equivalent Pro Forma Combined Per Unit Information of AmeriGas

The unaudited AmeriGas equivalent pro forma per unit amounts set forth in the table below are calculated by multiplying the unaudited pro forma combined per share amounts of UGI by the Mixed Election Exchange Ratio.

General

You should read the information set forth below in conjunction with the summary historical financial information of UGI and AmeriGas included elsewhere in this proxy statement/prospectus and the historical financial statements and related notes of UGI and AmeriGas that are incorporated into this proxy statement/prospectus by reference. See “—Summary Historical Consolidated Financial Data of UGI,” “—Summary Historical Consolidated Financial Data of AmeriGas” and “Where You Can Find More Information.”

The unaudited pro forma per share information of UGI does not purport to represent the actual results of operations that UGI would have achieved or dividends that would have been declared had the companies been combined during these periods or to project the future results of operations that UGI may achieve or the dividends it may pay after the merger.

 

     As of and for
the Six Months Ended
March 31, 2019
     As of and for
the Fiscal Year Ended
September 30, 2018
 

Historical—UGI

     

Net income per share attributable to UGI Shareholders

     

Basic

   $ 1.77      $ 4.13  

Diluted

   $ 1.74      $ 4.06  

Dividends declared per share

   $ 0.52      $ 1.02  

Book value per share (a)

   $ 22.12      $ 21.19  

Historical—AmeriGas

     

Income per limited partner unit—basic and diluted

   $ 2.24      $ 1.54  

Distribution per common unit declared for the period

   $ 1.90      $ 3.80  

Book value per common unit (a)

   $ 6.45      $ 5.77  

Pro Forma Combined—UGI

     

Net income per share attributable to UGI Shareholders (b)

     

Basic

   $ 2.04      $ 3.72  

Diluted

   $ 2.01      $ 3.67  

Dividends declared per share (c)

   $ 1.07      $ 2.11  

Book value per share (d)

   $ 20.37     

Equivalent Pro Forma Combined—AmeriGas (e)

 

Net income per share attributable to UGI Shareholders

     

Basic

   $ 0.89      $ 1.86  

Diluted

   $ 0.87      $ 1.84  

Dividends declared per share

   $ 0.54      $ 1.05  

Book value per share

   $ 9.25     


 

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(a)

The historical book value per share or unit was calculated as follows (in millions, except per share or unit amounts):

 

     As of March 31, 2019  
     UGI      AmeriGas  

Equity or capital, as applicable, before noncontrolling interests

   $ 3,853.0      $ 599.4  

Divided by: Number of shares or units outstanding at end of period

     174.147        92.998  
  

 

 

    

 

 

 

Book value per share or unit outstanding

   $ 22.12      $ 6.45  
  

 

 

    

 

 

 

 

     As of September 30, 2018  
     UGI      AmeriGas  

Equity or capital, as applicable, before noncontrolling interests

   $ 3,681.4      $ 536.6  

Divided by: Number of shares or units outstanding at end of period

     173.749        92.977  
  

 

 

    

 

 

 

Book value per share or unit outstanding

   $ 21.19      $ 5.77  
  

 

 

    

 

 

 

 

(b)

Amounts are from the unaudited pro forma condensed consolidated financial statements included under “Unaudited Pro Forma Condensed Consolidated Financial Statements.”

(c)

The pro forma combined UGI dividends declared amounts were calculated as follows (in millions, except per share amounts):

 

     Six Months Ended
March 31, 2019
 
     UGI      AmeriGas      Total  

Declared dividends or distributions, as applicable, in the period to the public (historical)

   $ 90.5      $ 131.5      $ 222.0  

Divided by: Pro forma combined number of shares outstanding as of the Record Date (f)

           208.369  
        

 

 

 

Dividends per share declared in the period (pro forma)

         $ 1.07  
        

 

 

 

 

     Year Ended
September 30, 2018
 
     UGI      AmeriGas      Total  

Declared dividends or distributions, as applicable, in the period to the public (historical)

   $ 176.9      $ 263.0      $ 439.9  

Divided by: Pro forma combined number of shares outstanding as of the Record Date (f)

           208.370  
        

 

 

 

Dividends per share declared in the period (pro forma)

         $ 2.11  
        

 

 

 

 

(d)

The pro forma combined UGI, book value per share was calculated as follows: (in millions, except per share amount):

 

     As of
March 31,
2019
 

Pro forma equity before noncontrolling interests

   $ 4,243.8  

Divided by: Pro forma combined number of shares outstanding (f)

     208.370  
  

 

 

 

Book value per share

   $ 20.37  
  

 

 

 

 

(e)

Equivalent pro forma amounts are calculated by multiplying pro forma combined UGI amounts by the Mixed Election Exchange Ratio of 0.500.



 

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(f)

Pro forma combined number of shares calculated as follows (in millions, except exchange ratio):

 

     As of March 31, 2019  
     UGI      AmeriGas      Total  

Number of public shares outstanding as of Record Date

     173.749        69.243     

Exchange ratio

        0.500     

Number of public shares outstanding (pro forma)

     173.749        34.622        208.371  
        

 

 

 

 

     As of September 30, 2018  
     UGI      AmeriGas      Total  

Number of public shares outstanding as of Record Date

     173.749        69.243     

Exchange ratio

        0.500     

Number of public shares outstanding (pro forma)

     173.749        34.622        208.371  
        

 

 

 

Comparative Share/Unit Prices and Distributions

UGI Shares are currently listed on the NYSE under the ticker symbol “UGI.” AmeriGas common units are currently listed on the NYSE under the ticker symbol “APU.” The table below sets forth, for the fiscal quarters indicated, the high and low sale prices per UGI Share on the NYSE and per AmeriGas common unit on the NYSE. The table also shows the amount of cash dividends declared on UGI Shares and cash distributions on AmeriGas common units for the fiscal quarters indicated.

 

     UGI Shares      AmeriGas Common Units  
     High      Low      Cash
Dividend
     High      Low      Cash
Distributions
 

Fiscal Year 2019

                 

Fourth quarter (through July 8, 2019) (a)

   $ 54.05    $ 51.72    $ —      $ 35.33    $ 34.31    $ —  

Third quarter

   $ 55.68      $ 50.40      $ 0.3000      $ 36.89      $ 30.78      $ 0.9500  

Second quarter

   $ 57.28      $ 51.05      $ 0.2600      $ 31.75      $ 24.18      $ 0.9500  

First quarter

   $ 59.31      $ 50.71      $ 0.2600      $ 40.81      $ 22.75      $ 0.9500  

Fiscal Year 2018

                 

Fourth quarter

   $ 55.94      $ 50.31      $ 0.2600      $ 43.79      $ 39.01      $ 0.9500  

Third quarter

   $ 52.49      $ 43.60      $ 0.2500      $ 43.30      $ 39.42      $ 0.9500  

Second quarter

   $ 48.04      $ 42.51      $ 0.2500      $ 48.37      $ 39.41      $ 0.9500  

First quarter

   $ 49.77      $ 46.43      $ 0.2500      $ 46.85      $ 43.61      $ 0.9500  

Fiscal Year 2017

                 

Fourth quarter

   $ 51.11      $ 46.59      $ 0.2500      $ 46.50      $ 42.00      $ 0.9500  

Third quarter

   $ 52.00      $ 45.91      $ 0.2375      $ 47.92      $ 42.52      $ 0.9500  

Second quarter

   $ 50.38      $ 45.03      $ 0.2375      $ 50.00      $ 44.25      $ 0.9400  

First quarter

   $ 46.66      $ 41.79      $ 0.2375      $ 48.24      $ 43.50      $ 0.9400  

Fiscal Year 2016

                 

Fourth quarter

   $ 48.13      $ 43.83      $ 0.2375      $ 50.11      $ 43.88      $ 0.9400  

Third quarter

   $ 45.25      $ 39.20      $ 0.2275      $ 47.02      $ 40.81      $ 0.9400  

Second quarter

   $ 40.85      $ 31.59      $ 0.2275      $ 44.16      $ 32.36      $ 0.9200  

First quarter

   $ 37.51      $ 31.51      $ 0.2275      $ 44.96      $ 30.80      $ 0.9200  

 

(a)

Dividends and cash distributions in respect of the fourth quarter of fiscal year 2019 have not been declared or paid.

The following table presents per share closing prices of UGI Shares and AmeriGas common units (i) on April 1, 2019, the last trading day before the public announcement of the merger, and (ii) on July 8, 2019. This table also presents the equivalent market value per AmeriGas common unit on such dates. The equivalent market



 

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values per AmeriGas common unit have been determined by multiplying the closing price of UGI Shares on those dates by 0.500 and adding $7.63, as if the merger had been effective on such date.

 

     UGI
Shares
     AmeriGas
Common Units
     Equivalent Market
Value per AmeriGas
Common Unit
 

April 1, 2019

   $ 55.39      $ 31.13      $ 35.325  

July 8, 2019

   $ 53.21    $ 35.00    $ 34.235

Although the Mixed Election Exchange Ratio is fixed, the market prices of UGI Shares and AmeriGas common units will fluctuate prior to the completion of the merger and the market value of the merger consideration ultimately received by AmeriGas Unitholders will depend on the closing price of UGI Shares on the day the merger is completed. Thus, AmeriGas Unitholders will not know the exact market value of the merger consideration they will receive until the closing of the merger.

Litigation Related to the Merger (See page 95)

On June 5, 2019, a purported unitholder class action lawsuit captioned Scarantino, et al., v. AmeriGas Partners, L.P., et al., Case No. 1:19CV01045 (the “Scarantino Lawsuit”), was filed in the United States District Court for the District of Delaware against AmeriGas, the members of the GP Board, UGI, Holdings, Merger Sub and the General Partner (collectively, “Scarantino Defendants”).

The plaintiff in the Scarantino Lawsuit (“Scarantino”) alleges purported claims challenging the merger and this proxy statement/prospectus filed in connection with the merger. According to Scarantino, this proxy statement/prospectus is allegedly misleading because, among other things, it fails to disclose certain information concerning, in general, (a) the background and process that led to the execution of the merger agreement and (b) the timing and nature of all communications regarding the future employment and directorship of the General Partner’s officers and directors. Based on these allegations, and in general, Scarantino alleges that (i) AmeriGas and the members of the GP Board have violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder and (ii) the members of the GP Board, UGI, Holdings, Merger Sub and the General Partner have violated Section 20(a) of the Exchange Act.

Based on these allegations, Scarantino seeks to enjoin the Scarantino Defendants from proceeding with or consummating the merger. To the extent that the merger is consummated before injunctive relief is granted, Scarantino seeks to have the merger rescinded. Scarantino also seeks damages and attorneys’ fees.

The Scarantino Defendants cannot predict the outcome of this or any other lawsuits that might be filed subsequent to the date of the filing of this proxy statement/prospectus, nor can the Scarantino Defendants predict the amount of time and expense that will be required to resolve such litigation. The Scarantino Defendants believe the Scarantino Lawsuit is without merit and intend to defend vigorously against the Scarantino Lawsuit and any other actions challenging the merger. See “Special Factors—Litigation Related to the Merger.”

On July 2, 2019, a purported unitholder lawsuit captioned Votto v. AmeriGas Partners, L.P., et al., Case No. 2:19-cv-02888-CFK (the “Votto Lawsuit”), was filed in the United States District Court for the Eastern District of Pennsylvania against AmeriGas, the members of the GP Board, UGI, Holdings, Merger Sub, AGI and the General Partner (collectively, “Votto Defendants”).

The plaintiff in the Votto Lawsuit (“Votto”) alleges purported claims challenging the merger and this proxy statement/prospectus filed in connection with the merger. According to Votto, this proxy statement/prospectus contains allegedly materially incomplete and misleading information concerning: (i) the valuation analyses prepared by AmeriGas’ financial advisor, TPH, in support of their fairness opinion and (ii) the potential conflicts of interest faced by the GP Board during the process leading up to the merger agreement.



 

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Based on these allegations, Votto seeks to enjoin the Votto Defendants from proceeding with or consummating the merger. To the extent that the merger is consummated before injunctive relief is granted, Votto seeks to have the merger rescinded or to receive rescissory damages. Votto also seeks other damages and attorneys’ fees.

The Votto Defendants cannot predict the outcome of this or any other lawsuits that might be filed subsequent to the date of the filing of this proxy statement/prospectus, nor can the Votto Defendants predict the amount of time and expense that will be required to resolve such litigation. The Votto Defendants believe the Votto Lawsuit is without merit and intend to defend vigorously against the Votto Lawsuit and any other actions challenging the merger. See “Special Factors—Litigation Related to the Merger.”

Recent Developments

On July 2, 2019, UGI Energy Services, LLC (“UGIES”), an indirect, wholly owned subsidiary of UGI, entered into a Purchase and Sale Agreement with Columbia Midstream & Minerals Group, LLC (a subsidiary of TC Energy Corporation) (“Seller”), UGI, solely for the purpose of providing a limited parent guarantee of a portion of the purchase price, and TransCanada PipeLine USA Ltd. (“Seller Guarantor”), a subsidiary of TC Energy Corporation, solely for the purpose of providing a limited parent guarantee of Seller’s indemnification obligations under the agreement, to acquire 100% of the membership interests of Columbia Midstream Group, LLC, which owns four natural gas gathering pipeline systems in the southwestern Appalachian Basin, for $1.187 billion in cash, subject to customary post-closing adjustments. Also on July 2, 2019, UGIES entered into a separate Purchase and Sale Agreement with Seller and Seller Guarantor, solely for the purpose of providing a limited parent guarantee of Seller’s indemnification obligations under the agreement, to acquire Seller’s 47.5% interest in Pennant Midstream, LLC, a joint venture that owns and operates a natural gas gathering pipeline system and processing plant in the southwestern Appalachian Basin, for $88 million in cash.

Completion of these acquisitions is subject to certain customary conditions, including, among others, (i) there being no law or injunction prohibiting the transactions, (ii) subject to specified materiality standards, the accuracy of certain representations and warranties of the other party and (iii) compliance by the respective parties in all material respects with their respective covenants. The acquisitions are expected to close in the fourth quarter of UGI’s fiscal year. The merger is not conditioned upon completion of either of these acquisitions, and neither of these acquisitions is conditioned upon completion of the merger.



 

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SPECIAL FACTORS

This section of the proxy statement/prospectus describes the material aspects of the proposed merger. This section may not contain all of the information that is important to you. You should carefully read this entire proxy statement/prospectus and the documents incorporated herein by reference, including the full text of the merger agreement, for a more complete understanding of the merger. A copy of the merger agreement is attached as Annex A hereto. In addition, important business and financial information about each of UGI and AmeriGas is included in or incorporated into this proxy statement/prospectus by reference. See “Where You Can Find More Information.”

Overview of Special Factors

The merger is a “going-private” transaction under SEC rules and the Exchange Act. Accordingly, Rule 13e-3 and related rules under the Exchange Act require that AmeriGas and the UGI Filing Parties make certain disclosures regarding the merger. This “Special Factors” section contains various information that you should read carefully. For example, the section entitled “—Effect of the Merger” explains the material steps for completing the merger and results of the merger, including the surviving entity and the merger consideration to be received by various AmeriGas Unitholders. The section entitled “—Background of the Merger” explains, among other things, UGI’s purposes for the merger, the alternative methods of achieving such purposes considered by the UGI Board and the general negotiation of the merger agreement. The sections entitled “—Recommendation of the GP Audit Committee and the GP Board; Reasons for Recommending Approval of the Merger” and “—Position of the UGI Filing Parties as to the Fairness of the Merger” respectively explain why the GP Audit Committee and the GP Board, on the one hand, and the UGI Filing Parties, on the other hand, believe the merger is fair and reasonable to, and in the best interests of, AmeriGas and the Unaffiliated AmeriGas Unitholders. The sections entitled “—Opinion of the Financial Advisor to the GP Audit Committee” and “—J.P. Morgan Securities LLC Financial Advisor Materials” respectively summarize the process and methodologies followed by TPH and J.P. Morgan in rendering their opinion to the GP Audit Committee and UGI Board, respectively. You are encouraged to carefully read this “Special Factors” section and this entire proxy statement/prospectus, along with the documents incorporated herein by reference.

Effect of the Merger

Subject to the terms and conditions of the merger agreement and in accordance with the laws of the State of Delaware, the merger agreement provides for the merger of Merger Sub with and into AmeriGas. AmeriGas, which is sometimes referred to following the merger as the surviving entity, will survive the merger and become an indirect, wholly owned subsidiary of UGI, and the separate limited liability company existence of Merger Sub will cease. After the completion of the merger, the certificate of limited partnership of AmeriGas in effect immediately prior to the completion of the merger will be the certificate of limited partnership of the surviving entity, until amended in accordance with its terms and applicable law, and the AmeriGas partnership agreement in effect immediately prior to the completion of the merger will be the agreement of limited partnership of the surviving entity from and after the completion of the merger until amended or restated.

The merger agreement provides that as consideration for the merger, each AmeriGas common unit issued and outstanding as of immediately prior to the completion of the merger (other than AmeriGas common units held by UGI or its subsidiaries or the General Partner) will be automatically converted into the right to receive, at the election of each AmeriGas Unitholder, but subject to any applicable withholding tax and proration as described below, one of the following forms of consideration: (i) 0.6378 UGI Shares; (ii)(A) $7.63 in cash, without interest and (B) 0.500 UGI Shares; or (iii) $35.325 in cash, without interest.

The merger consideration is subject to a proration designed to ensure that the number of UGI Shares issuable as merger consideration will equal approximately 34,621,411 UGI Shares. AmeriGas Unitholders may elect the Share Election, the Mixed Election or the Cash Election. However, the ability for AmeriGas Unitholders

 

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to receive the merger consideration they elected will depend on the elections of other AmeriGas Unitholders. The proration of the merger consideration payable to AmeriGas Unitholders in the merger will not be known until the Exchange Agent tallies the results of the elections made by AmeriGas Unitholders, which will not occur until near or after completion of the merger.

AmeriGas Unitholders will not receive any fractional UGI Shares in the merger. Instead, each AmeriGas Unitholder whose AmeriGas common units are converted into UGI Shares pursuant to the merger agreement who otherwise would have received a fraction of a UGI Share will be entitled to receive cash in lieu of such fractional UGI Share.

At the completion of the merger, the General Partner’s 1% economic general partner interest in AmeriGas will convert into (i) 10,615,711 AmeriGas common units, which will remain outstanding as partnership interests in AmeriGas, and (ii) a non-economic general partner interest in AmeriGas. The AmeriGas common units owned by the General Partner that are issued and outstanding immediately prior to the completion of the merger will be unaffected by the merger and will remain outstanding as partnership interests in AmeriGas.

Each of the AmeriGas common units owned by UGI and its subsidiaries (and for the sake of clarity, excluding the AmeriGas common units owned by the General Partner) that are issued and outstanding immediately prior to the completion of the merger will be automatically cancelled and will cease to exist, with no consideration being paid thereon. See “Proposal 1: The Merger Agreement—The Merger; Effective Time; Closing” for more information.

AmeriGas’ net book value (calculated as total assets minus total liabilities) as of March 31, 2019 was approximately $633.1 million, and AmeriGas’ net earnings for the six months ended March 31, 2019 was $263.6 million.

As of March 31, 2019, UGI beneficially owned 25.6% of the outstanding AmeriGas common units, representing an effective beneficial interest in AmeriGas’ net book value of approximately $149.7 million, equal to 23.6% of AmeriGas’ net book value. After including UGI’s combined indirect 2% general partner interests in AmeriGas and in AmeriGas’ operating subsidiary, AmeriGas Propane, L.P. (“AmeriGas OLP”), UGI’s combined beneficial interests in AmeriGas’ net book value as of March 31, 2019 was approximately $196.9 million, equal to 31.1% of AmeriGas’ net book value. If the merger is completed, UGI’s beneficial interest in the net assets of AmeriGas and AmeriGas OLP will increase to $633.1 million, equal to 100% of AmeriGas’ net book value (based upon AmeriGas’ net book value as of March 31, 2019).

For the six months ended March 31, 2019, UGI beneficially owned approximately 25.6% of the outstanding AmeriGas common units and an indirect 1% general partner interest in AmeriGas, which general partner interest included incentive distribution rights. UGI also beneficially owned a 1% general partner interest in AmeriGas OLP. These ownership interests resulted in the attribution of $89.8 million of AmeriGas’ net income to UGI, equal to approximately 33.6% of AmeriGas’ net income for the six months ended March 31, 2019. If the merger is completed, UGI’s beneficial interest in AmeriGas’ net income will increase to $267.1  million, equal to 100% of AmeriGas’ net income (based upon AmeriGas’ net income for the six months ended March 31, 2019).

Background of the Merger

Senior management of UGI and the General Partner, together with the UGI Board and the GP Board (collectively, as used in this section, the “parties”), regularly review operational and strategic opportunities to maximize value for their respective investors. In connection with these reviews, the parties have, from time to time, evaluated potential transactions that would further their respective strategic objectives.

During the last two years, the parties have considered ways to reduce AmeriGas’ cost of capital, including structures that modify or eliminate the General Partner’s general partner interests in AmeriGas, including the

 

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AmeriGas incentive distribution rights, as well as simplify AmeriGas’ governance structure. The parties also have considered the external environment for master limited partnerships (“MLPs”), particularly the inaccessibility of equity capital markets and the passage of the TCJA in 2017, which lowered the U.S. federal corporate income tax rate from 35% to 21% and reduced the benefits of the MLP pass-through structure. These market trends have contributed to a significant number of MLPs eliminating their incentive distribution rights (either directly or through mergers with the entities holding their incentive distribution rights), converting to corporations (for income tax and state law purposes) or both.

In light of these considerations, UGI engaged Latham & Watkins LLP (“Latham”) to provide legal advice regarding potential structuring options and related transactions.

In July 2017, following two consecutive record warm winters, the parties began to actively engage in discussions to ensure that AmeriGas would have sufficient capital to continue to pursue growth initiatives in the event of another significantly warmer-than-normal winter heating season. On November 7, 2017, following negotiations with, and the review and approval by, the GP Audit Committee (comprised of four members of the GP Board who meet the independence qualifications under the AmeriGas partnership agreement and the Charter of the GP Audit Committee for membership on the GP Audit Committee), AmeriGas and UGI publicly announced that they had entered into a Standby Equity Commitment Agreement (the “SECA”), pursuant to which UGI committed to make up to $225 million of capital contributions to AmeriGas through July 1, 2019, for consideration comprising of new Class B common units representing limited partner interests in AmeriGas (“Class B Units”), upon the request of AmeriGas, acting at the sole and absolute discretion of the GP Audit Committee. For more information, see “Special Factors—Standby Equity Commitment Agreement.”

On November 1, 2017, UGI engaged J.P. Morgan to provide financial advisory services to assist with UGI’s review and evaluation of various strategic alternatives. UGI and J.P. Morgan executed a formal engagement letter on March 13, 2018, as supplemented by a second engagement letter between such parties executed on October 11, 2018, but each with an effective date as of November 1, 2017. At that time, the UGI Board and the GP Board began to evaluate a possible transaction in which AmeriGas would seek to acquire another publicly traded entity (referred to herein as “Company A”) and, in connection with the proposed transaction, the rights and obligations associated with the General Partner’s general partner interest in AmeriGas, including the AmeriGas incentive distribution rights, would be modified or eliminated. On April 27, 2018, the UGI Board and the GP Board made a joint written offer to Company A to acquire Company A through a merger transaction. On May 16, 2018, Company A’s chief executive officer responded in a telephone conversation with Mr. John L. Walsh, President and Chief Executive Officer of UGI, that Company A had reviewed and analyzed the offer and concluded that it was not in the best interest of Company A’s equityholders to proceed with a potential transaction, and that Company A was not interested in engaging in any further discussions regarding a potential transaction.

Following the rejection by Company A of the offer, the UGI Board began to consider a transaction that would include a restructuring or elimination of the General Partner’s general partner interest in AmeriGas, including AmeriGas’ incentive distribution rights, in exchange for additional AmeriGas common units or, in the alternative, a “take-private” transaction that would involve UGI’s acquisition of all of the AmeriGas common units that it and its affiliates did not already own.

In the summer of 2018, the UGI Board met on several occasions with representatives of J.P. Morgan and Latham to discuss strategic alternatives and potential transaction structures. The GP Board was made aware in general terms of the UGI Board’s ongoing deliberations and was advised that a proposal would be forthcoming in September 2018.

On September 14, 2018, in anticipation of a potential transaction proposal from UGI, the GP Board delegated to the GP Audit Committee the power and authority to, among other things, (i) review and evaluate any potential conflicts arising in connection with a transaction modifying or restructuring the General Partner’s

 

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general partner interest in AmeriGas or the rights and obligations associated with that interest, or otherwise restructuring the relationship between UGI and AmeriGas (any of the foregoing, a “potential transaction”), (ii) review and evaluate the terms and conditions of a potential transaction on behalf of AmeriGas and the Unaffiliated AmeriGas Unitholders, (iii) negotiate the terms and conditions of a potential transaction, (iv) determine whether any potential transaction is fair and reasonable to AmeriGas, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to AmeriGas), and in the best interests of AmeriGas and (v) determine whether or not to approve, and to recommend that the GP Board approve, any potential transaction, with any such approval and related recommendation by the GP Audit Committee constituting “Special Approval” for all purposes under the AmeriGas partnership agreement. The GP Board determined that no member of the GP Audit Committee had any relationship with or ownership interest in UGI or AmeriGas that would interfere with the exercise of such member’s independent judgment with respect to a potential transaction. The GP Audit Committee was also authorized to retain legal and financial advisors. The GP Audit Committee determined to reengage Potter Anderson & Corroon LLP (“Potter Anderson”) as its independent legal advisor and TPH as its independent financial advisor (each of whom the GP Audit Committee had previously engaged to serve as its legal advisor and financial advisor, respectively, in connection with the SECA transaction and the proposal to acquire Company A). In connection with TPH’s reengagement, TPH provided the GP Audit Committee with a written relationship disclosure, which disclosed two prior engagements by the GP Audit Committee and no other investment banking engagements for compensation since 2016 by UGI or AmeriGas.

On September 19, 2018, following the deliberations and analysis that had occurred over the prior several months, the UGI Board made a proposal to the GP Audit Committee to eliminate AmeriGas’ incentive distribution rights and convert the General Partner’s economic general partner interests in AmeriGas and in AmeriGas OLP to non-economic general interests in exchange for additional AmeriGas common units and a new series of AmeriGas Class C preferred units, for total aggregate consideration of $675 million (the “IDR Buy-In Proposal”), which proposal stated that it would expire on November 19, 2018. On November 12, 2018, UGI agreed to extend the expiration date of the IDR Buy-In Proposal to December 3, 2018.

UGI management discussed the IDR Buy-In Proposal with the GP Audit Committee and the UGI Board on several occasions, including with their respective financial and legal advisors, but such parties were unable to reach agreement on the valuation of the AmeriGas incentive distribution rights.

As part of its review of the IDR Buy-In Proposal, the GP Audit Committee independently reviewed with its advisors the benefits and disadvantages of multiple possible MLP transaction structures, including, but not limited to, a partial or complete restructuring of AmeriGas’ incentive distribution rights, a reset of such incentive distribution rights, a potential cut of AmeriGas’ distributions and possible variations of an MLP simplification transaction. In subsequent discussions with UGI, the GP Audit Committee was unable to reach agreement with UGI on, among other things, the value of AmeriGas’ incentive distribution rights. However, the GP Audit Committee, based on guidance from AmeriGas management and financial advice from TPH, determined that AmeriGas’ incentive distribution rights constitute a significant burden on AmeriGas’ ability to generate and grow cash flow after distribution payments, particularly in light of the fact that the current AmeriGas distribution was in the 50% payment to the General Partner tier under the AmeriGas partnership agreement. Therefore, the GP Audit Committee remained open to continuing discussions with UGI on potential transaction structures that would improve AmeriGas’ ability to generate free cash flow and overall financial health.

In connection with its review of the IDR Buy-In Proposal, the GP Audit Committee also discussed and considered, with assistance from TPH, among other things, AmeriGas’ past performance (both on an absolute basis and as compared against budget in prior years) as well as metrics that may impact AmeriGas’ future performance, including operating assumptions and financial measures. AmeriGas management informed the GP Audit Committee and its advisors that it had set internal goals of achieving a distribution coverage ratio of 1.2x and a maximum leverage ratio of 4.0x. TPH provided the GP Audit Committee with a financial review of AmeriGas’ targeted distribution coverage and leverage ratios, a review of recent market precedent on unitholder

 

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distributions by MLPs and various distribution strategies that AmeriGas could take to meet AmeriGas management’s stated targets. The GP Audit Committee also considered, with the assistance of TPH, AmeriGas’ future financial performance in the event that warmer-than-normal weather continued in winter heating seasons. Based on AmeriGas management’s guidance and TPH’s financial advice, the GP Audit Committee concluded that AmeriGas’ current distribution levels may not be sustainable and that AmeriGas may have to reduce its distributions in the near- to mid-term. The GP Audit Committee considered the sustainability of the current distribution in its deliberations of the IDR Buy-In Proposal, as well as other possible MLP simplification transaction structures. Ultimately, the GP Audit Committee determined that it was too far apart on value with UGI for the IDR Buy-In Proposal to negotiate it further at that time. In light of the inability to agree on the valuation of the AmeriGas incentive distribution rights, on November 20, 2018, the GP Audit Committee instructed TPH to coordinate with J.P. Morgan and UGI over the coming weeks regarding possible transaction structures for a new proposal.

On December 3, 2018, the IDR Buy-In Proposal expired.

On December 4, 2018, at a jointly held investor day (the “December Investor Day”), UGI and AmeriGas announced a 120-day strategic review focused on strengthening AmeriGas’ balance sheet and setting a path for AmeriGas to achieve a minimum distribution coverage ratio of 1.2x and a maximum leverage ratio of 4.0x.

On December 13, 2018, at the request of the GP Audit Committee, representatives of TPH held a meeting with representatives of UGI and J.P. Morgan. At the meeting, TPH, UGI and J.P. Morgan discussed possible MLP simplification and other potential transaction structures for a new proposal by UGI, taking into account, among other things, AmeriGas’ publicly stated target distribution coverage and leverage ratios and the possibility of a distribution cut in the near- to mid-term to meet such target distribution coverage and leverage ratios. The participants also discussed the 120-day strategic review announced at the December Investor Day and UGI’s desire to negotiate a solution that permanently addressed or eliminated AmeriGas’ incentive distribution rights within that time frame. Following the discussion, UGI and J.P. Morgan indicated they would follow-up with a revised proposed transaction structure.

In January 2019, Company A sent Mr. Walsh an unsolicited communication proposing to acquire AmeriGas and the General Partner through a merger transaction, without specifying the potential economic terms of that proposal. The UGI Board shared the proposal with the GP Board and considered the merits of the proposal. The UGI Board determined that its desire to retain its interest in AmeriGas’ retail propane business had not changed, and therefore the UGI Board rejected the proposal from Company A.

In early 2019, after considering the relative merits and risks associated with the alternative potential transactions described above and given the inability of UGI and the GP Audit Committee to reach an agreement on a valuation with respect to the IDR Buy-In Proposal, UGI began to consider a merger in which UGI would acquire all of the publicly held AmeriGas common units that it and its subsidiaries did not already own (the “proposed merger transaction”) based on a range of possible exchange ratios. In particular, the UGI Board and UGI management, with the assistance of J.P. Morgan, began to discuss a possible merger transaction that would be structured to provide the AmeriGas Unitholders with a premium to the trading price of the AmeriGas common units, while eliminating AmeriGas’ incentive distribution rights and simplifying its overall governance structure. UGI management considered this structure as the most attractive alternative for achieving the objective of decreasing AmeriGas’ cost of capital and simplifying its governance structure in a manner consistent with UGI’s intent to retain its controlling interest in AmeriGas. Based on these considerations, UGI management determined that it would be appropriate for the transaction structure to be presented to the UGI Board for its consideration.

On January 17, 2019, the UGI Board, together with representatives from J.P. Morgan and Latham, met telephonically to discuss the proposed merger transaction.

On January 21, 2019, the UGI Board met again telephonically to discuss the proposed merger transaction.

 

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On January 25, 2019, the UGI Board, together with representatives from J.P. Morgan and Latham, met telephonically to consider the making of an offer (the “Initial Offer”) to pursue the proposed merger transaction for consideration payable on each AmeriGas common unit not owned by UGI or its subsidiaries, including the General Partner (the “Public Common Units”), of 0.500 UGI Shares plus $4.03 in cash (the “Cash Portion Consideration”). Based on the closing price of UGI Shares on January 25, 2019, the Initial Offer valued each Public Common Unit at $32.00 (the “AmeriGas Per Unit Valuation”), or a 7.1% premium. The Initial Offer also provided, among other things, that AmeriGas Unitholders (other than UGI and its subsidiaries, including the General Partner) could elect, subject to proration, to receive UGI Shares, cash or a combination of UGI Shares and cash, that the signing of the merger agreement would be conditioned on a recommendation by the GP Audit Committee and that completion of the merger would be conditioned on approval by the holders of a majority of the AmeriGas common units, including AmeriGas common units held by UGI and its affiliates, including the General Partner. The Initial Offer also indicated that the maximum number of newly issued UGI Shares would be approximately 19.9% of the outstanding UGI Shares at the time of issuance and, as a result, no vote by the UGI Shareholders on the proposed merger transaction would be required under NYSE rules. Finally, the Initial Offer requested an indicative response from the GP Audit Committee on or before February 15, 2019, and provided that the proposal would expire on March 15, 2019. The UGI Board approved the making of the Initial Offer, which was subsequently delivered to the GP Audit Committee on January 28, 2019.

On January 31, 2019, the GP Audit Committee held a telephonic meeting with representatives of Potter Anderson and TPH. At the meeting, TPH provided the GP Audit Committee with, among other information, a summary of the Initial Offer, trading analyses of AmeriGas and UGI, a review of relative price performance of AmeriGas, UGI and certain of their peers, a historical AmeriGas/UGI exchange ratio analysis, an analysis of premiums in precedent transactions and a price target analysis of AmeriGas and UGI based on publicly available consensus analyst estimates. TPH also shared its preliminary observations in respect of the consideration offered in the Initial Offer and proposed to make requests for additional information from UGI. Potter Anderson discussed the GP Board’s delegating resolutions, dated September 14, 2018, and the GP Audit Committee’s mandate and responsibilities thereunder. The GP Audit Committee discussed UGI’s statement made at the GP Board meeting on January 29, 2019, that UGI would not be interested in selling its controlling interest in AmeriGas. As a result, the GP Audit Committee determined that it would not be productive or practical to conduct outreach to third parties.

On February 1, 2019, the GP Audit Committee delivered information requests regarding financial, operational and legal matters to representatives of UGI.

On February 3, 2019, Mr. William J. Marrazzo, Chairman of the GP Audit Committee, held a telephonic meeting with Mr. Hugh J. Gallagher, President and Chief Executive Officer of the General Partner, to discuss AmeriGas management’s views of the Initial Offer, and Mr. Marrazzo sought Mr. Gallagher’s assistance with the information requests by the GP Audit Committee.

Following UGI’s submission of the Initial Offer to the GP Audit Committee, Latham began preparing a draft merger agreement, which it provided to the UGI Board for review on February 1, 2019. On February 4, 2019, representatives from Latham discussed the draft merger agreement with representatives of UGI and J.P. Morgan.

On February 4, 2019, Mr. Marrazzo exchanged correspondence with Ms. Monica M. Gaudiosi, Vice President and General Counsel, Secretary of UGI, regarding the information requests sent on February 1, 2019. Ms. Gaudiosi answered certain questions related to, among other things, the availability of financial forecasts for AmeriGas and UGI, the availability of certain analyst reports and certain tax implications of the proposed merger transaction.

From February 5, 2019 to February 6, 2019, Potter Anderson and Latham exchanged correspondence regarding a proposed mutual confidentiality agreement between UGI and AmeriGas.

 

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On February 7, 2019, following execution of the mutual confidentiality agreement by UGI and AmeriGas, Ms. Gaudiosi delivered additional information to TPH, which included, among other things, UGI’s financial information, financial analyst reports and documents related to the tax implications of the proposed merger transaction.

In the evening of February 7, 2019, at the direction of the UGI Board, Latham provided a draft merger agreement to Potter Anderson. The initial draft provided, among other things: (i) that the merger would be conditioned on the approval of the merger agreement by the affirmative vote of the holders of a majority of the AmeriGas common units (including UGI and its affiliates), (ii) that AmeriGas would be subject to “no-shop” provisions that would prevent discussions and negotiations with competing bidders subject only to a limited exception for discussions and negotiations in response to an unsolicited alternative proposal that is likely to result in a superior proposal and if failure to so respond “would constitute a breach of” the GP Audit Committee’s duties under applicable law, as modified by the AmeriGas partnership agreement, and (iii) that the GP Board must recommend approval of the merger agreement to the AmeriGas Unitholders, and that the GP Audit Committee could not effect an AmeriGas adverse recommendation change except in response to a superior proposal. Because UGI and the GP Audit Committee had not yet agreed to the economic terms of the proposed merger transaction, the draft merger agreement did not address such terms.

On February 8, 2019, the GP Audit Committee held a video teleconference meeting with UGI management, as well as representatives of J.P. Morgan, Potter Anderson and TPH. At the meeting, at the request of the GP Audit Committee, UGI provided a presentation, referencing the materials presented at the December Investor Day, of its business operations and key financial information, including financial projections of UGI, and explained its perspective on the benefits of the proposed merger transaction for AmeriGas and the Unaffiliated AmeriGas Unitholders.

Also on February 8, 2019, a representative of AmeriGas contacted a representative of Baker Botts L.L.P. (“Baker Botts”) regarding the potential engagement of Baker Botts to serve as legal advisor to AmeriGas in considering the proposed merger transaction and formally engaged Baker Botts on February 11, 2019.

On February 12, 2019, representatives of TPH, Potter Anderson, Latham and UGI held a telephonic meeting to discuss certain tax implications of the proposed merger transaction on UGI, AmeriGas and the AmeriGas Unitholders who would receive merger consideration.

Later on February 12, 2019, the GP Audit Committee held a telephonic meeting with representatives of Potter Anderson and TPH. At the meeting, TPH provided the GP Audit Committee with, among other information, updates to certain of its analyses, a review of relative price performance of AmeriGas, UGI and certain of their peers, an updated historical exchange ratio analysis, an analysis of the proposed and various alternative exchange ratios and certain analyses of UGI and AmeriGas on a status quo and pro forma basis, and a review of the then-current financial projections of AmeriGas and UGI. The analyses included scenarios in which the current distribution policy for AmeriGas was maintained, as well as a second scenario in which AmeriGas distributions were cut to achieve leverage and coverage targets of 4.0x and 1.2x, respectively. The GP Audit Committee also discussed certain preliminary matters related to a possible indicative response to the Initial Offer.

Later that afternoon, UGI delivered UGI’s assessment of the proposed merger transaction’s anticipated synergies and transaction costs to the GP Audit Committee, Potter Anderson and TPH.

On February 14, 2019, the GP Audit Committee held a telephonic meeting with representatives of Potter Anderson and TPH. At the meeting, TPH provided the GP Audit Committee with, among other information, updates to certain of its trading analyses and the then-current financial projections of AmeriGas and UGI, a summary of the relative performance of AmeriGas and certain of its peers, an analysis of the pro forma impact of the proposed merger transaction on AmeriGas and UGI and a summary of the illustrative pre-tax and after-tax pro forma impact of the proposed merger transaction on AmeriGas and UGI. The GP Audit Committee and

 

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Potter Anderson also discussed their initial reactions to the draft merger agreement. After further discussion, the GP Audit Committee determined it was not prepared to provide UGI with an indicative response by February 15, 2019 as requested in the Initial Offer, given, among other things, the desire of the GP Audit Committee to receive additional input on the potential tax impact of the proposed merger transaction on AmeriGas Unitholders who would receive merger consideration.

On February 15, 2019, the GP Audit Committee informed UGI in writing that the GP Audit Committee and its advisors were continuing their evaluation of the Initial Offer and that the GP Audit Committee intended to provide UGI with its indicative response to the Initial Offer the following week.

Later on February 15, 2019, Messrs. Marrazzo and Gallagher discussed telephonically the information requests by the GP Audit Committee. Mr. Marrazzo discussed the draft merger agreement with Mr. Gallagher.

Following Mr. Marrazzo’s conversation with Mr. Gallagher, Messrs. Marrazzo and Walsh discussed telephonically the status of the information requests by the GP Audit Committee, the draft merger agreement and certain timing considerations. Mr. Walsh acknowledged that the indicative response of the GP Audit Committee would not be required to be received on February 15, 2019.

Later on February 15, 2019, Potter Anderson and Baker Botts held a telephonic meeting to discuss the draft merger agreement.

On February 17, 2019, UGI delivered high-level passive loss estimate calculations of the illustrative tax impact of the proposed merger transaction.

On February 18, 2019, UGI provided additional tax-related information, including, among other things, status quo AmeriGas tax calculations and pro forma UGI tax calculations, as well as other additional non-tax information.

On February 19, 2019, representatives of TPH held a telephonic meeting with representatives of Latham and UGI, during which such parties discussed certain tax-related questions for status quo AmeriGas and pro forma UGI.

Later on February 19, 2019, the GP Audit Committee held a telephonic meeting with representatives of Potter Anderson and TPH. At the meeting, TPH provided the GP Audit Committee with, among other information, an analysis of the Initial Offer, including illustrative tax impacts of the Initial Offer to AmeriGas and the AmeriGas Unitholders who would receive merger consideration, and a potential counterproposal by AmeriGas. The GP Audit Committee and its advisors also discussed the pre-December Investor Day AmeriGas common unit trading price and suggested that such trading price is one of many factors the GP Audit Committee may consider when reviewing the Initial Offer and the proposed merger transaction. After consideration of TPH’s presentation materials and further deliberations, the GP Audit Committee decided not to respond to the draft merger agreement until economic and other key transaction terms were more advanced and determined to make a counteroffer to UGI (the “AmeriGas Counteroffer”) on the following terms: (i) 0.500 UGI Shares and Cash Portion Consideration of $13.94 for each Public Common Unit, (ii) AmeriGas would continue to pay its quarterly distribution at the then current level of $0.95 per AmeriGas common unit until the close of the transaction, including on a pro-rated basis for the final partial quarter during which the closing of the merger would occur, and (iii) that the merger be conditioned on obtaining the approval of the holders of a majority of the AmeriGas common units held by the Unaffiliated AmeriGas Unitholders (the “unaffiliated unitholder approval condition”).

On February 20, 2019, Messrs. Marrazzo and Walsh held a telephonic meeting to discuss the forthcoming AmeriGas Counteroffer. Mr. Marrazzo reviewed the GP Audit Committee’s principal considerations for such counteroffer with Mr. Walsh.

 

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On February 21, 2019, the GP Audit Committee delivered a letter to UGI detailing the AmeriGas Counteroffer, as well as TPH materials prepared to be provided to UGI to support the GP Audit Committee’s negotiations of the terms of the proposed merger transaction. The GP Audit Committee’s letter also referenced its consideration of a pre-December Investor Day AmeriGas common unit trading price as a basis for comparing possible premiums resulting from the proposed merger transaction.

On February 22, 2019, Messrs. Walsh and Marrazzo held a telephonic meeting to further discuss the AmeriGas Counteroffer and UGI management’s initial reactions to the AmeriGas Counteroffer.

On February 25, 2019, the UGI Board, together with representatives from J.P. Morgan and Latham, met telephonically to discuss the terms of the AmeriGas Counteroffer. Later that day, the UGI Board delivered a second offer to the GP Audit Committee for the proposed merger transaction with the following primary terms: (i) 0.500 UGI Shares and Cash Portion Consideration of $6.32 for each Public Common Unit, representing a $33.50 AmeriGas Per Unit Valuation and a 13% premium based on the closing price of UGI Shares and AmeriGas common units on February 22, 2019, (ii) UGI would agree that distributions in respect of AmeriGas common units would continue at the current rate of $0.95 per unit through the record date immediately preceding the closing date for the quarter in which the closing of the proposed merger transaction would occur, (iii) a rejection of any proration of AmeriGas distributions for the quarter in which the closing occurs, and (iv) a rejection of an unaffiliated unitholder approval condition (the “Second UGI Offer”). The Second UGI Offer also disputed the GP Audit Committee’s emphasis on unaffected pre-December Investor Day market prices. Prior to the delivery of the Second UGI Offer, Messrs. Walsh and Marrazzo held a brief telephonic meeting to discuss generally the forthcoming Second UGI Offer.

On February 26, 2019, representatives of TPH and J.P. Morgan held a telephonic meeting to discuss the financial bases for the Second UGI Offer. At the meeting, TPH and J.P. Morgan discussed their respective clients’ perspectives on the bases for the AmeriGas Counteroffer and the Second UGI Offer.

Later on February 26, 2019, the GP Audit Committee held a meeting with representatives of Potter Anderson and TPH. At the meeting, TPH reported on its earlier meeting with J.P. Morgan. In addition, TPH provided the GP Audit Committee, with, among other information, updates to the analysis of the proposed exchange ratio and various alternative ratios for the proposed merger transaction. Potter Anderson also reviewed with the GP Audit Committee, among other things, the applicable standards of conduct under the AmeriGas partnership agreement.

On February 27, 2019, representatives of Potter Anderson and Baker Botts met telephonically to discuss potential responses to the draft merger agreement.    

Later on February 27, 2019, the GP Audit Committee held a telephonic meeting with Mr. Walsh. At the meeting, the GP Audit Committee and Mr. Walsh discussed, among other things, the financial bases for the Second UGI Offer and UGI’s response to specific terms of the AmeriGas Counteroffer, including, but not limited to, the GP Audit Committee’s consideration of using a pre-December Investor Day AmeriGas common unit trading price as a basis for comparing possible premiums resulting from the proposed merger transaction. The GP Audit Committee reiterated to Mr. Walsh the GP Audit Committee’s position that uncertainty resulting from the December Investor Day presentation adversely affected the AmeriGas common unit trading price. Mr. Walsh discussed UGI’s view that the post-December Investor Day AmeriGas common unit trading price was the more appropriate basis for comparing possible premiums given that the market had incorporated the new information disclosed at the December Investor Day and AmeriGas’ February 6, 2019 earnings announcement. Mr. Walsh further indicated that absent the proposed merger transaction, a cut of AmeriGas distributions of approximately 20% would be necessary for AmeriGas to achieve its targeted coverage ratio.

On February 28, 2019, the GP Audit Committee held a telephonic meeting with representatives of Potter Anderson and TPH. At the meeting, TPH provided the GP Audit Committee with, among other information, a

 

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summary of the Second UGI Offer, updates to certain of its trading analyses and the then-current financial projections of AmeriGas and UGI and updates to the analysis of the proposed and various alternative exchange ratios for the proposed merger transaction. The GP Audit Committee considered the various headwinds facing AmeriGas’ business, including limited distribution coverage, high leverage, unfavorable weather conditions and an inability to meet forecasted expectations in recent years across a range of weather and market conditions. The GP Audit Committee also noted that the use of the AmeriGas common unit trading price was but one basis for the GP Audit Committee’s overall view of value for the proposed merger transaction. The representatives of Potter Anderson also reviewed their proposed responses to the draft merger agreement circulated by Latham on February 7, 2019. The GP Audit Committee then determined that it would make a counteroffer to the Second UGI Offer, and simultaneously submit a revised draft of the merger agreement, on the following terms (the “Second AmeriGas Counteroffer”): (i) 0.500 UGI Shares and Cash Portion Consideration of $10.00 for each Public Common Unit, representing a $37.45 AmeriGas Per Unit Valuation based on the closing price of UGI Shares on February 28, 2019, (ii) AmeriGas Unitholders would be entitled to receive the full distribution amount with respect to the quarter ending prior to the closing regardless of whether the applicable record date has occurred, pursuant to a mechanic in the revised draft merger agreement whereby the merger consideration payable to AmeriGas Unitholders who would receive merger consideration would be increased by $0.95 in cash if the closing occurred prior to the record date for distribution in respect of the completed quarter ended prior to the closing, (iii) AmeriGas Unitholders would be entitled to receive the prorated amount of distributions on AmeriGas common units in the quarter in which the closing occurs, less the amount of the dividend expected to be paid on UGI Shares issued in the merger and (iv) that the merger would provide for an unaffiliated unitholder approval condition.

Later that day, the GP Audit Committee delivered the Second AmeriGas Counteroffer to UGI, together with a revised draft of the merger agreement, which reflected comments from Potter Anderson on behalf of the GP Audit Committee and Baker Botts on behalf of AmeriGas. The revised draft merger agreement included, among other things, in addition to the provisions noted above, the following matters: (i) an adjustment of the percentage thresholds for alternative proposals from 15% to 25% and for superior proposals from 80% to 50%, (ii) the requirement for the General Partner to enter into a support agreement, in which it would agree to vote its AmeriGas common units in favor of the merger, (iii) permitting the GP Audit Committee to effect an AmeriGas adverse recommendation change in response to certain specified intervening events in addition to a superior proposal and (iv) a decrease in the termination fee payable from $25.0 million to $20.0 million and a decrease of the expense reimbursement cap from $7.5 million to $5.0 million.

On March 1, 2019, Messrs. Marrazzo and Gallagher held a telephonic meeting to discuss the Second AmeriGas Counteroffer and related AmeriGas business considerations, as well as AmeriGas’ forecasts.

Following Mr. Marrazzo’s conversation with Mr. Gallagher, Messrs. Marrazzo and Walsh held a telephonic meeting to discuss valuation terms, including the proposed AmeriGas Per Unit Valuation. In addition, Mr. Walsh explained UGI’s position with respect to the unaffiliated unitholder approval condition and the prorated distribution proposals.

Later in the day, representatives of TPH and UGI held a telephonic meeting to discuss UGI’s financial projections.

On March 4, 2019, the UGI Board, together with representatives from J.P. Morgan and Latham, met telephonically to discuss the Second AmeriGas Counteroffer, as well as certain important issues raised by the latest draft of the merger agreement. The UGI Board discussed a proposed response to the Second AmeriGas Counteroffer, which would include (i) 0.500 UGI Shares and Cash Portion Consideration of $6.80 for each Public Common Unit, representing a $34.25 AmeriGas Per Unit Valuation based on the closing price of UGI Shares on March 4, 2019, (ii) a rejection of the GP Audit Committee’s proposal with respect to proration of distributions to the AmeriGas Unitholders for the quarter in which the closing of the merger would occur and (iii) a rejection of an unaffiliated unitholder approval condition (the “Third UGI Offer”).

 

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After the UGI Board meeting, Messrs. Marrazzo and Walsh held a telephonic meeting to discuss generally the forthcoming Third UGI Offer.

Later that evening, the UGI Board delivered the Third UGI Offer to the GP Audit Committee and its representatives.

On March 5, 2019, Mr. Walsh delivered correspondence to the GP Audit Committee reinforcing his support of the Third UGI Offer.

Later on March 5, 2019, the GP Audit Committee held a meeting with representatives of Potter Anderson and TPH. At the meeting, the GP Audit Committee and its advisors discussed the Third UGI Offer, including, among other things, the proposed merger consideration, UGI’s opposition to an unaffiliated unitholder approval condition and UGI’s unwillingness to pay pro rata distributions to the AmeriGas Unitholders for the fiscal quarter in which the closing of the transaction occurred. After discussion, the GP Audit Committee authorized Mr. Marrazzo to contact Mr. Walsh to conduct subsequent negotiations.

On March 6, 2019, Messrs. Marrazzo and Walsh held a telephonic meeting to discuss the proposed AmeriGas Per Unit Valuation, as well as the GP Audit Committee’s position that the merger provide for an unaffiliated unitholder approval condition. At the meeting, Mr. Walsh confirmed that UGI was prepared to increase the Cash Portion Consideration offered in connection with the proposed merger transaction to $7.30, representing (together with a fixed share component of 0.500 UGI Shares) a $34.75 AmeriGas Per Unit Valuation based on the closing price of UGI Shares on March 4, 2019 (the new offer constituting the “Revised Third UGI Offer”).

Later that evening, the GP Audit Committee held a telephonic meeting with representatives of Potter Anderson and TPH. At the meeting, the GP Audit Committee and its advisors discussed the Revised Third UGI Offer and the substance of Mr. Marrazzo’s discussions with Mr. Walsh. The GP Audit Committee authorized Mr. Marrazzo to conduct further negotiations with Mr. Walsh.

On the morning of March 7, 2019, Messrs. Marrazzo and Walsh held a telephonic meeting to discuss the proposed AmeriGas Per Unit Valuation, the payment of full quarterly distributions between signing and closing of the merger, including and up to the quarter preceding the closing of the transaction, no proration of distributions with respect to the quarter in which the closing of the merger would occur and the GP Audit Committee’s position that the merger provide for an unaffiliated unitholder approval condition.

Later on March 7, 2019, the GP Audit Committee held a meeting with representatives of Potter Anderson and TPH. At the meeting, the GP Audit Committee and its advisors discussed the substance of Mr. Marrazzo’s meeting with Mr. Walsh. The GP Audit Committee and its advisors further considered the proposed merger transaction and authorized Mr. Marrazzo to contact Mr. Walsh to assess whether the Revised Third UGI Offer was UGI’s best and final offer and to seek additional Cash Portion Consideration for the AmeriGas Unitholders who would receive merger consideration. The GP Audit Committee recessed the meeting to allow Mr. Marrazzo to contact Mr. Walsh. Messrs. Marrazzo and Walsh had a telephonic discussion, during which Mr. Walsh indicated that UGI was prepared to increase the Cash Portion Consideration offered in connection with the proposed merger transaction to $7.45, which represented (together with a fixed share component of 0.500 UGI Shares) a $34.90 AmeriGas Per Unit Valuation based on the closing price of UGI Shares on March 4, 2019, subject to no proration of distributions for the quarter in which the closing of the merger would occur and no unaffiliated unitholder approval condition. Mr. Walsh also indicated that such offer was UGI’s best and final offer. Following such discussion, the GP Audit Committee reconvened and determined that it would accept UGI’s latest offer, subject to documentation of the transaction, including a support agreement, and confirmation of UGI and AmeriGas’ mutual agreement on the distribution policy for the AmeriGas Unitholders between the signing and closing of the merger.

 

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Later on March 7, 2019, the GP Audit Committee conveyed to UGI that it was prepared to move forward with the proposed merger transaction, subject to negotiation and finalization of definitive documents, on the following terms: (i) consideration payable to the holders of Public Common Units to be comprised of 0.500 UGI Shares and Cash Portion Consideration of $7.45 per Public Common Unit, (ii) a condition that the merger will be subject to the approval of the holders of a majority of outstanding AmeriGas common units, including those held by UGI and its affiliates, including the General Partner, and (iii) AmeriGas Unitholders would be entitled to distributions with respect to the quarter ending prior to the closing of the proposed merger transaction regardless of the timing of the record date for such distribution, but would not receive a pro rata AmeriGas distribution for the quarter in which closing occurs (the “Third AmeriGas Counteroffer”).

Later that evening, Mr. Marrazzo contacted Mr. Gallagher to update him on the GP Audit Committee’s response to the latest negotiations.

On March 8, 2019, Messrs. Marrazzo and Walsh held a telephonic meeting to discuss the AmeriGas Per Unit Valuation, in which Messrs. Marrazzo and Walsh agreed to update the Third AmeriGas Counteroffer by increasing the Cash Portion Consideration offered in connection with the proposed merger transaction to $7.63 per Public Common Unit in order to maintain (together with a fixed share component of 0.500 UGI Shares) the $34.90 AmeriGas Per Unit Valuation based on the closing price of UGI Shares on March 7, 2019.

Later in the day, Mr. Walsh, on behalf of the UGI Board, delivered a response to the Third AmeriGas Counteroffer, which included the following terms: (i) agreement on the Cash Portion Consideration of $7.63 (with a fixed share component of 0.500 UGI Shares), representing a $34.90 AmeriGas Per Unit Valuation based on the closing price of UGI Shares on March 7, 2019, and (ii) a request for legal advisors to confer regarding the payment of distributions for any completed fiscal quarter occurring prior to closing, regardless of the record date, in order to avoid any unintended consequences (the “Fourth UGI Offer”). The Fourth UGI Offer stated that it would expire on March 15, 2019.

On March 11, 2019, UGI management shared with the GP Audit Committee an updated forecast for UGI, including an updated forecast for AmeriGas, for the fiscal year ending September 30, 2019 (the “4+8 Forecast”), which forecast reflected actual results for the first four months of the fiscal year and forecasted results for the remainder of the fiscal year, reflecting a negative variance in financial performance for 2019 relative to the financial forecast UGI had previously provided to the GP Audit Committee and TPH.

On March 12, 2019, the representatives of TPH held a telephonic meeting with Mr. G. Gary Garcia, the (now former) Treasurer of UGI, to discuss the 4+8 Forecast. Mr. Garcia discussed the revised forecast outlook for each of UGI’s main business segments and discussed the impact of weather on UGI’s reforecasting efforts. In response to questions from TPH, Mr. Garcia stated that there were no changes to the forecasts previously provided to the GP Audit Committee and TPH for fiscal year 2020 and onwards.

On March 13, 2019, the UGI Board met telephonically to discuss, among other things, the status of negotiations on the proposed merger transaction, as well as a review of the strategic rationales for the transaction.

Also on March 13, 2019, with respect to the 4+8 Forecast, UGI provided TPH a breakout of the updated 2019 forecast by business segment.

Later that evening, the GP Audit Committee held a telephonic meeting with representatives of Potter Anderson and TPH. At the meeting, the GP Audit Committee and its advisors discussed TPH’s recent meeting with Mr. Garcia and the 4+8 Forecast. TPH also presented an overview of UGI’s recent share price and earnings performance. The GP Audit Committee and TPH discussed evaluating a downside earnings per share sensitivity to the recently received updated forecasts that carried forward the negative impacts in 2019 to forecast years 2020 and onwards.

 

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On March 14, 2019, Mr. Marrazzo, on behalf of the GP Audit Committee, delivered written correspondence to Mr. Walsh acknowledging receipt of the 4+8 Forecast and indicating that the GP Audit Committee and its advisors were evaluating the materials. The GP Audit Committee requested, among other things, (i) a revised UGI pro forma forecast for the years beyond 2019, which fully incorporated the impact of the 4+8 Forecast, (ii) the receipt of a UGI downside financial projections case, or if non-existent, confirmation of such and (iii) an analysis of the historical budget versus actual performance of UGI’s Midstream & Marketing segment for the last three years.

Later that day, Mr. Walsh notified Mr. Marrazzo that UGI had extended the expiration of the Fourth UGI Offer to March 22, 2019.

On March 15, 2019, Mr. Walsh responded to Mr. Marrazzo’s correspondence in writing, as well as through a telephonic conversation with Mr. Marrazzo. Mr. Walsh reiterated the UGI Board’s continued support for the proposed merger transaction providing for $7.63 in Cash Portion Consideration (together with a fixed share component of 0.500 UGI Shares) and provided (i) clarification that UGI had not updated the forecast for 2020 or beyond in light of the 4+8 Forecast revision, (ii) confirmation that no UGI downside financial projections case existed, (iii) an update on the analysis of the historical budget versus actual performance of UGI’s Midstream and Market segment and (iv) clarification on the AmeriGas and UGI distribution and dividend schedules. In his correspondence, Mr. Walsh provided further commentary to Mr. Marrazzo on UGI management’s updated guidance expectations for both UGI and AmeriGas for fiscal year 2019, including guiding to the low end of AmeriGas’ previously announced $610-650 million Adjusted EBITDA range.

Later that evening, Latham delivered a revised draft of the merger agreement to Baker Botts and Potter Anderson. The revised draft of the merger agreement included, among other things, the following changes: (i) a revision of the percentage thresholds for alternative and superior proposals to 20% and 70%, respectively, (ii) deleting the provisions increasing the merger consideration by $0.95 per unit in the event the closing occurs prior to the record date for the distribution in respect of the quarter ending immediately prior to the closing and increasing the merger consideration by an amount equal to the prorated quarterly AmeriGas distributions for the quarter in which the closing occurs, (iii) the removal of the unaffiliated unitholder approval condition and (iv) the elimination of the ability of the GP Audit Committee to make an AmeriGas adverse recommendation change in response to an intervening event in addition to a superior proposal. In addition, UGI agreed to enter into a support agreement, subject to negotiation of the terms thereof.

On March 16, 2019 and March 17, 2019, UGI and AmeriGas provided to the GP Audit Committee and TPH additional information and clarification regarding UGI’s Midstream & Marketing Segment.

On March 17, 2019, TPH shared with Mr. Garcia and Ms. Gaudiosi a compilation of the forecasts and updates that had been provided to the GP Audit Committee and TPH, along with the downside sensitivity previously discussed with the GP Audit Committee.

On March 18, 2019, TPH held a telephonic meeting with Mr. Garcia to obtain further clarification on the 4+8 Forecast and discuss the downside sensitivity. Mr. Garcia stated that it was UGI’s view that its outlook was appropriately reflected in the 4+8 Forecast and was more favorable than reflected in the downside sensitivity. That same day, Mr. Walsh provided to Mr. Marrazzo written observations regarding the TPH materials. As part of such communication, Mr. Walsh indicated UGI management’s current expectation that AmeriGas would achieve $635 million in Adjusted EBITDA in fiscal year 2020, growing by $10 million per year thereafter.

Later in the day, the GP Audit Committee held a meeting with representatives of Potter Anderson and TPH. At the meeting, TPH provided the GP Audit Committee with, among other information, updates to certain of its trading analyses and the then-current financial projections of AmeriGas and UGI. TPH observed that the 4+8 Forecast and the revised AmeriGas management projections had limited impact on financial analyses given that fiscal year 2020 onward operational projections, including EBITDA, were not impacted by the revisions to the fiscal year 2019

 

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forecasts. The GP Audit Committee also discussed with Potter Anderson the manner of ensuring that the AmeriGas Unitholders would receive the distribution for the quarter ended immediately prior to the closing.

On March 19, 2019, Messrs. Marrazzo and Walsh held a telephonic meeting to discuss the open issue relating to distributions for the quarter ended immediately prior to the closing. Mr. Marrazzo and Mr. Walsh confirmed that the merger agreement would require that the record date for such distribution be set on a date prior to the closing of the merger.

Later that day, Potter Anderson and Baker Botts held a telephonic meeting to discuss Latham’s revised draft merger agreement previously provided to Potter Anderson and Baker Botts on March 15, 2019. Shortly after its meeting with Baker Botts, Potter Anderson held a telephonic meeting with Latham to discuss Latham’s further revisions to the draft merger agreement, including, but not limited to, a provision requiring the General Partner to designate the record date for the distribution related to the quarter ending immediately prior to the closing in a manner that would ensure the payment of such quarterly distribution to the AmeriGas Unitholders.

On March 20, 2019, the UGI Board met telephonically to discuss, among other things, the status of the proposed merger transaction.

Also on March 20, 2019, Potter Anderson, Baker Botts and Latham held a telephonic meeting to discuss the GP Audit Committee’s and UGI’s respective positions on the remaining outstanding issues related to the draft merger agreement, including among other things, (i) the inclusion of the right for the GP Audit Committee to effect an AmeriGas adverse recommendation change in response to an intervening event, (ii) the terms of the Support Agreement and (iii) the inclusion of a provision requiring the General Partner to designate the record date for the quarterly cash distribution related to the quarter immediately prior to the quarter in which the completion of the merger occurs so that such record date precedes the completion of the merger so as to permit the payment of such quarterly distribution to the AmeriGas Unitholders.

Later on March 20, 2019, Potter Anderson and Baker Botts delivered a revised draft of the merger agreement to Latham. The revised draft included, among other things, the following changes: (i) the ability of the GP Audit Committee to effect an AmeriGas adverse recommendation change in response to an intervening event in addition to a superior proposal and (ii) a requirement that the General Partner designate the record date for the distribution related to the quarter ending immediately prior to the closing of the merger.

On March 21, 2019, Ms. Gaudiosi informed the GP Audit Committee that the UGI Board had extended the expiration date of the Fourth UGI Offer to March 29, 2019.

Later on March 21, 2019, the GP Audit Committee held a meeting with representatives of Potter Anderson and TPH. At the meeting, TPH sought and received the GP Audit Committee’s guidance on the financial projections to be utilized in TPH’s final analyses, including a downside earnings per share sensitivity for UGI.

Later on March 21, 2019, Latham delivered a revised draft of the merger agreement to Potter Anderson and Baker Botts, which, among other things, generally accepted the changes included in the Potter Anderson/Baker Botts draft of March 20, 2019. Between March 21, 2019 and the signing of the proposed merger transaction on April 1, 2019, representatives of Baker Botts and Potter Anderson, in consultation with AmeriGas management and the GP Audit Committee, and representatives of Latham, in consultation with UGI, participated in multiple conference calls and exchanged emails to negotiate and finalize the terms of the draft merger agreement and the draft disclosure schedules.

On March 22, 2019, Latham delivered a draft of the Support Agreement to Potter Anderson and Baker Botts. The draft Support Agreement provided that the General Partner would be obligated to vote or cause its AmeriGas common units to be voted in favor of the merger, subject to the terms and conditions of the agreement.

 

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On March 26, 2019, Potter Anderson and Baker Botts delivered a revised draft of the Support Agreement to Latham, which included, among other changes, a requirement that the General Partner vote its AmeriGas common units against any actions that might impede, postpone or adversely affect the merger.

On March 27, 2019, Ms. Gaudiosi informed Mr. Marrazzo that the executive committee of the UGI Board had decided to extend the expiration date of the Fourth UGI Offer to April 2, 2019.

On March 29, 2019, the GP Audit Committee held a meeting with representatives of Potter Anderson, TPH and Baker Botts, as well as Mr. Gallagher and Ms. Michelle Bimson Maggi, Group Counsel and Director of Government Affairs of the General Partner. At the meeting, the representatives of AmeriGas management provided their view of the proposed merger transaction and the rationale thereof. Baker Botts and Potter Anderson reviewed the terms and conditions of the revised draft merger agreement and Support Agreement, including among other things, the election and proration mechanics. Following Baker Botts’ and AmeriGas management’s departure from the meeting, the GP Audit Committee also reviewed with TPH its updated preliminary financial presentation.

On April 1, 2019, the GP Audit Committee met telephonically to discuss the proposed merger transaction, including the terms and conditions of the merger agreement and the Support Agreement. At the meeting, Potter Anderson updated the GP Audit Committee on the few changes to the merger agreement and Support Agreement since the previous GP Audit Committee meeting. TPH presented its financial analysis of the Merger Consideration (as defined below in “—Opinion of the Financial Advisor to the GP Audit Committee”) and, at the request of the GP Audit Committee, rendered its oral opinion to the GP Audit Committee that, as of April 1, 2019, based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations of the review undertaken by TPH in connection with the preparation of its opinion as set forth therein, the Merger Consideration to be paid to the Unaffiliated AmeriGas Unitholders in the merger pursuant to the merger agreement was fair from a financial point of view to such Unaffiliated AmeriGas Unitholders. TPH subsequently confirmed its oral opinion in writing, dated April 1, 2019, to the GP Audit Committee. Among other things, the GP Audit Committee noted that the merger consideration of 0.500 UGI Shares and Cash Portion Consideration of $7.63 per Public Common Unit represented an AmeriGas Per Unit Valuation of $35.34 based on the March 29, 2019 closing price for UGI Shares. After further deliberations, the GP Audit Committee unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair and reasonable to, and in the best interests of, AmeriGas and the Unaffiliated AmeriGas Unitholders, (ii) approved, and recommended that the GP Board approve, the merger agreement, the Support Agreement, the execution, delivery and performance of the merger agreement and the Support Agreement, and the transactions contemplated thereby, including the merger, and recommended that the GP Board submit the merger agreement to a vote of the AmeriGas Unitholders and (iii) recommended, and recommended that the GP Board recommend, approval of the merger agreement by the AmeriGas Unitholders. The GP Audit Committee’s approval of the merger agreement, the Support Agreement, and the transactions contemplated thereby, including the merger, constituted “Special Approval” thereof for all purposes under the AmeriGas partnership agreement.

Following the GP Audit Committee meeting, at a telephonic meeting of the GP Board, the full GP Board discussed the merger, including the terms and conditions of the merger agreement and the Support Agreement. During the meeting, Baker Botts presented an overview of the merger agreement, and the GP Board was informed of the GP Audit Committee’s approval of the merger agreement. The GP Board unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair and reasonable to, and in the best interests of, AmeriGas and the Unaffiliated AmeriGas Unitholders, (ii) approved the merger agreement, the Support Agreement, the execution, delivery and performance of the merger agreement and the Support Agreement and the transactions contemplated thereby, including the merger, (iii) resolved to submit the merger agreement to a vote of the AmeriGas Unitholders and (iv) recommended approval of the merger agreement and the transactions contemplated thereby, including the merger, by the AmeriGas Unitholders.

 

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Following the GP Board meeting on April 1, 2019, the UGI Board, together with representatives of J.P. Morgan and Latham, met telephonically to discuss the merger, including the terms and conditions of the merger agreement and the Support Agreement. During the meeting of the UGI Board, Latham presented an overview of the merger agreement and J.P. Morgan presented its financial analysis of the merger consideration to the UGI Board. At the same meeting and at the request of the UGI Board, J.P. Morgan rendered an oral opinion to the UGI Board, which was subsequently confirmed by delivery of a written opinion dated April 1, 2019, that, as of the date of its opinion, and based upon and subject to the assumptions made, matters considered, procedures followed, and qualifications and limitations of the review undertaken in rendering its opinion as set forth therein, the merger consideration to be paid by UGI in the merger was fair, from a financial point of view, to UGI. The UGI Board then unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are in the best interests of, and advisable to, UGI and its shareholders, and (ii) approved the merger agreement, the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated thereby, including the merger.

Later in the evening on April 1, 2019, UGI, Holdings, Merger Sub, AmeriGas and the General Partner executed the merger agreement and AmeriGas and the General Partner executed the Support Agreement, and in the morning of April 2, 2019, UGI and AmeriGas issued a joint press release announcing entry into the merger agreement and held a telephonic meeting to discuss the merger with investors.

Unaudited Financial Projections of UGI and AmeriGas

Neither UGI nor AmeriGas, as a matter of course, publicly discloses long-term financial projections because of, among other reasons, the uncertainty of the underlying assumptions and estimates and the unpredictability of its business and the competitive markets in which it operates. While UGI and AmeriGas prepare forecasts annually for internal budgeting and business planning purposes, such forecasts generally focus on the current fiscal year.

The summary financial projections included in this proxy statement/prospectus should not be regarded as predictive of actual future results nor should they be construed as financial guidance. The summary of the financial projections is not intended to influence or induce any AmeriGas Unitholder to vote in favor of the merger agreement. Instead, they have been included solely because these financial projections were made available to the GP Audit Committee and to TPH in connection with the rendering of its fairness opinion to the GP Audit Committee and performing its related financial analyses, as described in “—Opinion of the Financial Advisor to the GP Audit Committee,” and to J.P. Morgan, who used the financial projections in connection with rendering its fairness opinion to the UGI Board and performing its related financial analysis, as described in “—J.P. Morgan Securities LLC Financial Advisor Materials.”

The financial projections included in this proxy statement/prospectus are not the only series of projections that were prepared in connection with the merger given the extended negotiation period. At the beginning of the negotiation process, the GP Audit Committee, TPH and J.P. Morgan received an initial series of financial projections consisting of UGI and AmeriGas budget and plan materials. UGI and AmeriGas updated these financial projections over the course of negotiations prior to execution of the merger agreement to reflect developments in the business, including in respect of the 4+8 Forecast. The GP Audit Committee also had access to AmeriGas financial information through regularly scheduled meetings of the GP Audit Committee and the GP Board as well as interactions with AmeriGas management.

The financial projections are subjective in many respects. There can be no assurance that these financial projections will be realized or that actual results will not be significantly higher or lower than forecasted. In addition, the financial projections were not prepared with a view toward public disclosure or toward complying with GAAP, the published guidelines of the SEC regarding projections or the use of non-GAAP financial measures or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The prospective financial information included in this

 

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proxy statement/prospectus has been prepared by, and is the responsibility of, UGI and AmeriGas management. Ernst & Young LLP has neither audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the accompanying prospective financial information and, accordingly, Ernst & Young LLP does not express an opinion or any other form of assurance with respect thereto. The Ernst & Young LLP reports incorporated by reference in this proxy statement/prospectus relate to AmeriGas’ and UGI’s respective historical financial information. Such reports do not extend to the prospective financial information and should not be read to do so.

In developing the financial projections for the periods shown below, UGI and AmeriGas management made numerous material assumptions with respect to the business for the periods covered by the projections. UGI and AmeriGas each developed a management case (together, the “Management Case”) of financial projections, and the Management Case assumptions included, but were not limited to, the following:

 

   

weather conditions;

 

   

commodity pricing;

 

   

currency exchange fluctuations (as to UGI);

 

   

the amount and timing of dividends to UGI Shareholders (as to UGI);

 

   

the amounts and nature of future capital expenditures; and

 

   

other general business, market, industry and interest rate assumptions.

Important factors that may affect actual results and cause these financial projections not to be achieved include, but are not limited to, risks and uncertainties relating to UGI’s and AmeriGas’ business (including the ability to achieve strategic goals, objectives and targets over the applicable periods), industry performance, general business and economic conditions, the regulatory environment and other factors described in or referenced under “Cautionary Statement Regarding Forward-Looking Statements” and those risks and uncertainties detailed in UGI’s and AmeriGas’ public filings with the SEC. In addition, the projections also reflect assumptions that are subject to change and do not reflect revised prospects for UGI’s and AmeriGas’ business, changes in general business or economic conditions or any other transaction or event that has occurred or that may occur following the time the financial projections were prepared. Accordingly, there can be no assurance that these financial projections will be realized or that future financial results will not materially vary from these financial projections. In addition, different assumptions could result in different projections, which may or may not be realized. No one has made or makes any representation to any AmeriGas Unitholder regarding the information included in the financial projections set forth below.

THE FINANCIAL PROJECTIONS INCLUDED BELOW WERE MADE AVAILABLE TO THE GP AUDIT COMMITTEE, TPH, THE UGI BOARD AND J.P. MORGAN, IN EACH CASE AS DESCRIBED BELOW, IN CONNECTION WITH THEIR EVALUATION OF THE MERGER. NEITHER UGI NOR AMERIGAS INTENDS TO REVISE ANY FINANCIAL PROJECTIONS INCLUDED IN THIS PROXY STATEMENT/PROSPECTUS.

Unaudited Financial Projections of AmeriGas

AmeriGas Management Case

AmeriGas management made the following financial projections of AmeriGas available to the GP Audit Committee and TPH in connection with their evaluation of the merger. J.P. Morgan was made aware of the Adjusted EBITDA projections and TPH’s use of such Adjusted EBITDA projections. J.P. Morgan did not receive authorization to use and did not use the following financial projections.

 

(in millions, except for per unit data)    2019E      2020E      2021E      2022E      2023E  

Adjusted EBITDA (a)

   $ 610      $ 625      $ 634      $ 643      $ 652  

Total DCF (b)

   $ 384      $ 390      $ 399      $ 404      $ 406  

DCF per AmeriGas common unit (b) (c)

   $ 3.70      $ 3.73      $ 3.78      $ 3.80      $ 3.82  

 

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Capital Investment Case

AmeriGas management made the following financial projections of AmeriGas available to the GP Audit Committee and TPH in connection with their further evaluation of the merger. The financial projections below incorporate effects of the potential implementation of a capital investment program by AmeriGas and related projected benefits to AmeriGas’ customer service operations. J.P. Morgan did not receive and did not use such financial projections.

 

(in millions, except per unit data)    2019E      2020E      2021E      2022E      2023E  

Adjusted EBITDA (a)

   $ 610      $ 615      $ 641      $ 670      $ 702  

DCF per AmeriGas common unit (b) (c)

   $ 3.70      $ 3.61      $ 3.77      $ 3.89      $ 4.04  

Historical Weather Case

TPH, at the direction of, and in conjunction with, the GP Audit Committee, developed the following financial projections of AmeriGas which assume recent historical weather patterns would continue through the forecast period. AmeriGas management reviewed such financial projections. J.P. Morgan did not receive and did not use such financial projections.

 

(in millions, except per unit data)    2019E      2020E      2021E      2022E      2023E  

Adjusted EBITDA (a)

   $ 610      $ 597      $ 606      $ 615      $ 624  

DCF per AmeriGas common unit (b) (c)

   $ 3.70      $ 3.54      $ 3.60      $ 3.60      $ 3.60  

AmeriGas Distributions and DCF per AmeriGas common unit at the Targeted Distribution Policy

TPH, at the direction of, and in conjunction with, the GP Audit Committee, derived the following financial projections of AmeriGas using each of the AmeriGas operational cases, which reflected a distribution policy assuming 1.2x distribution coverage for fiscal year 2019 and flat common unit distribution levels thereafter throughout the forecast period, subject to distribution increases if a target leverage ratio of 4.0x debt to EBITDA and 1.2x distribution coverage were achieved (the “targeted distribution policy”). J.P. Morgan did not receive and did not use such financial projections.

The following table sets forth the projections of AmeriGas distributions per AmeriGas common unit at the targeted distribution policy from April 2019 through September 2023:

 

     2019E      2020E      2021E      2022E      2023E  

Targeted Distribution Policy

              

AmeriGas case

   $ 3.08      $ 3.08      $ 3.08      $ 3.08      $ 3.08  

Historical weather case

   $ 3.08      $ 3.08      $ 3.08      $ 3.08      $ 3.08  

Capital investment case

   $ 3.07      $ 3.07      $ 3.07      $ 3.07      $ 3.45  

The following table sets forth the projections of AmeriGas DCF per AmeriGas common unit at the targeted distribution policy from April 2019 through September 2023 (b):

 

     2019E      2020E      2021E      2022E      2023E  

Targeted Distribution Policy

              

AmeriGas case

   $ 3.72      $ 3.78      $ 3.87      $ 3.93      $ 3.99  

Historical weather case

   $ 3.72      $ 3.62      $ 3.69      $ 3.73      $ 3.77  

Capital investment case

   $ 3.70      $ 3.63      $ 3.82      $ 3.97      $ 4.16  

 

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Projections Prepared by UGI Management

UGI management made the following financial projections of AmeriGas available to the UGI Board and J.P. Morgan in connection with their evaluation of the merger; UGI management’s forecast of AmeriGas’ Adjusted EBITDA for the period 2019 through 2022 was also provided to the GP Audit Committee and TPH.

 

(in millions)    2019E      2020E      2021E      2022E  

Adjusted EBITDA (a)

   $ 610      $ 635      $ 645      $ 655  

Total DCF (b)

   $ 379      $ 403      $ 421      $ 431  

 

(a)

Adjusted EBITDA is a non-GAAP measure defined as earnings before interest, income taxes, depreciation and amortization (“EBITDA”), without regard to the effects of gains and losses on commodity derivative instruments not associated with current-period transactions and other gains and losses that competitors do not necessarily have. Management believes that Adjusted EBITDA is a meaningful non-GAAP financial measure used by investors to (1) compare AmeriGas’ operating performance with that of other companies within the propane industry and (2) assess AmeriGas’ ability to meet loan covenants. AmeriGas’ definition of Adjusted EBITDA may be different from those used by other companies. Management uses Adjusted EBITDA to compare year-over-year profitability of the business without regard to capital structure, as well as to compare the relative performance of AmeriGas to that of other MLPs without regard to their financing methods, capital structure, income taxes, and the effects of gains and losses on commodity derivative instruments not associated with current-period transactions or historical cost basis.

(b)

Distributable Cash Flow (“DCF”) is a non-GAAP measure defined as net cash flows from operations excluding the impact of changes in operating working capital, provision for uncollectible accounts and other cash flows from operations, less capital expenditures that maintain the operating capacity of AmeriGas. DCF should not be considered as an alternative to net income (as an indicator of operating performance) or an alternative to cash flow (as a measure of liquidity or ability to service debt obligations) and is not a measure of performance or financial condition under GAAP. Management believes DCF is a meaningful non-GAAP measure for evaluating AmeriGas’ ability to declare and pay distributions pursuant to the terms of the AmeriGas partnership agreement. AmeriGas’ definition of DCF may be different from those used by other companies. Although management uses the non-GAAP measure DCF to evaluate the AmeriGas’ ability to generate cash available for distribution, actual distributions are determined based upon Available Cash as defined in the AmeriGas partnership agreement. The ability of AmeriGas to pay distributions on all AmeriGas common units depends upon a number of factors. These factors include (1) the level of AmeriGas earnings; (2) the cash needs of AmeriGas’ operations (including cash needed for maintaining and increasing operating capacity); (3) changes in operating working capital; and (4) AmeriGas’ ability to borrow under its credit agreement, to refinance maturing debt and to increase its long-term debt. Some of these factors are affected by conditions beyond UGI or AmeriGas’ control including weather, competition in markets AmeriGas serves, the cost of propane and changes in capital market conditions.

(c)

Assumes a $3.80 annual distribution per AmeriGas common unit.

Unaudited Financial Projections of UGI

Projections Prepared by UGI Management

UGI management made certain financial projections relating to UGI available to each of the GP Audit Committee, TPH, the UGI Board and J.P. Morgan.

The originally provided projections of Adjusted Diluted Earnings Per Share were updated in conjunction with the 4+8 Forecast. UGI provided to all parties its updated calculation of projected Adjusted Diluted Earnings Per Share for 2019. Additionally, UGI communicated to J.P. Morgan the impact of UGI’s updated projection of AmeriGas’ Adjusted EBITDA on Adjusted Diluted Earnings Per Share for the years 2020 and 2021. UGI did not provide the GP Audit Committee or TPH with its recalculation of Adjusted Diluted Earnings Per Share following delivery of the 4+8 Forecast. The Adjusted Diluted Earnings Per Share projections set forth in the table below reflect such impacts.

As described above under “—Unaudited Financial Projections of UGI and AmeriGas,” management of UGI and AmeriGas prepared separate projections relating to AmeriGas. Because UGI’s financial information includes AmeriGas on a consolidated basis, the GP Audit Committee and TPH adjusted UGI management’s financial projections for UGI, including its calculation of Adjusted Diluted Earnings Per Share, to take into account the projections for the AmeriGas business that were provided by AmeriGas management, rather than the projections for the AmeriGas business that were provided by UGI.

 

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(in millions, except for per share data)    2019E      2020E     2021E     2022E  

Adjusted Net Income Attributable to UGI (a)

   $ 442      $ 555     $ 610     $ 659(d

Adjusted Diluted Earnings Per Share (a)

   $ 2.49      $ 3.12(b   $ 3.43(c   $ 3.73(d

Capital Expenditures, Excluding Acquisitions

   $ 753      $ 709     $ 760     $ 829  

Acquisitions

     —        $ 10     $ 15     $ 15  

Investments Increase

   $ 19      $ 195       —         —    

Dividend Per Share (e)

   $ 1.10      $ 1.20     $ 1.25     $ 1.30(d

 

(a)

Adjusted Net Income Attributable to UGI is a non-GAAP measure defined as net income attributable to UGI after excluding net after-tax gains and losses on commodity and certain foreign currency derivative instruments not associated with current-period transactions (principally comprising changes in unrealized gains and losses on such derivative instruments) and other significant discrete items that can affect the comparison of period-over-period operating results, including losses on extinguishments of debt, major business combinations acquisition and integration costs, impairments of intangible assets and the remeasurement effects on income tax assets and liabilities associated with significant tax law changes. Adjusted Diluted Earnings per Share is derived from Adjusted Net Income Attributable to UGI. Management believes that these non-GAAP measures provide meaningful information to investors about UGI’s performance because they eliminate the impact of gains and losses on commodity and certain foreign currency derivative instruments not associated with current-period and other significant discrete items that can affect period-over-period comparisons. Non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute for, the comparable GAAP measures.

(b)

In February 2019, UGI management provided the GP Audit Committee and TPH with $3.14 as the Adjusted Diluted Earnings per Share figure for 2020E. UGI did not provide to TPH its recalculation of Adjusted Diluted Earnings Per Share following delivery of the 4+8 Forecast.

(c)

In February 2019, UGI management provided the GP Audit Committee and TPH with $3.45 as the Adjusted Diluted Earnings per Share figure for 2021E. UGI did not provide to TPH its recalculation of Adjusted Diluted Earnings Per Share following delivery of the 4+8 Forecast.

(d)

These projections, which were provided to all parties by UGI management, were not updated in connection with the 4+8 Forecast.

(e)

Derived by dividing projected dividends to public shareholders of UGI by projected UGI Shares outstanding.

Projections Prepared by AmeriGas Management

UGI Unlevered Cash Flow (Undiscounted Forecast)

TPH, at the direction of, and in conjunction with, the GP Audit Committee, derived the UGI estimated unlevered cash flow from April 2019 through September 2021 based on the UGI 4+8 case and the AmeriGas case, each as described in “—Opinion of the Financial Advisor to the GP Audit Committee,” and reflecting the impact of the merger on UGI. J.P. Morgan did not receive and did not use such financial projections.

(in millions)    2H 2019E      2020E      2021E  

Unlevered cash flow (undiscounted)

   $ 224      $ 593      $ 651  

Recommendation of the GP Audit Committee and the GP Board; Reasons for Recommending Approval of the Merger

The GP Audit Committee

The GP Audit Committee consists of four directors who are neither officers nor employees of the General Partner or any of its affiliates, including UGI, and thus meet the independence qualifications under the AmeriGas partnership agreement and the Charter of the GP Audit Committee for membership on the GP Audit Committee: Brian R. Ford, John R. Hartmann, William J. Marrazzo and K. Richard Turner. In connection with the merger agreement and the transactions contemplated thereby, including the merger, the GP Audit Committee functioned as a conflicts committee in providing the “Special Approval” required for the merger in the AmeriGas partnership agreement. On September 14, 2018, the GP Board delegated to the GP Audit Committee the power and authority to (i) review and evaluate any potential conflicts arising in connection with any “potential transaction” (as defined above in “—Background of the Merger”); (ii) review and evaluate the terms and conditions of any potential transaction on behalf of AmeriGas and the Unaffiliated AmeriGas Unitholders;

 

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(iii) negotiate the terms and conditions of any potential transaction; (iv) determine whether any potential transaction is fair and reasonable to AmeriGas, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to AmeriGas), and in the best interests of AmeriGas; and (v) determine whether or not to approve, and to recommend that the GP Board approve, any potential transaction, with any such approval and related recommendation by the GP Audit Committee constituting “Special Approval” for all purposes under the AmeriGas partnership agreement.

The GP Audit Committee retained TPH as its financial advisor and Potter Anderson as its legal counsel. The GP Audit Committee conducted a review and evaluation of the merger and the merger agreement and negotiated with UGI and its representatives with respect to the merger and the merger agreement.

On April 1, 2019, the GP Audit Committee unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair and reasonable to, and in the best interests of, AmeriGas and the Unaffiliated AmeriGas Unitholders, (ii) approved, and recommended that the GP Board approve, the merger agreement, the execution, delivery and performance of the merger agreement and the transactions contemplated thereby, including the merger, and recommended that the GP Board submit the merger agreement to a vote of the AmeriGas Unitholders and (iii) recommended, and recommended that the GP Board recommend, approval of the merger agreement by the AmeriGas Unitholders, with the foregoing approval constituting “Special Approval” of the merger agreement and the transactions contemplated thereby, including the merger, for all purposes under the AmeriGas partnership agreement.

Reasons for Recommending Approval of the Merger

The GP Audit Committee consulted with its financial and legal advisors and considered both positive and negative factors in making its determination and approvals, and the related recommendation to the GP Board.

The GP Audit Committee considered the following factors to be generally positive or favorable in making its determination and approvals, and the related recommendation to the GP Board:

 

   

The GP Audit Committee’s belief that the merger presents the best reasonably available opportunity to maximize value for the Unaffiliated AmeriGas Unitholders, which belief is based on consideration of the status quo and available alternative transaction structures between AmeriGas and UGI including, but not limited to, a restructuring or reset of the General Partner’s incentive distribution rights. Also, the GP Audit Committee’s belief that there are no viable alternative transactions for AmeriGas in lieu of a transaction with UGI in light of the controlling position of UGI through its indirect ownership of the General Partner and approximately 25.5% of the AmeriGas common units and UGI’s stated intention to remain in the propane distribution business through continued ownership of its controlling interest in AmeriGas.

 

   

The GP Audit Committee’s consideration of the challenges facing AmeriGas’ business, including, but not limited to, AmeriGas’ inability to consistently meet forecasted expectations in recent years across a range of weather and market conditions.

 

   

The potential for continued or increased volatility in weather patterns, in light of the fact that two of the last four years were significantly warmer than average temperatures.

 

   

The prospect that cash distributions with respect to AmeriGas common units would likely be reduced in light of UGI’s and the General Partner’s statements to the effect that, if the merger is not consummated, the General Partner’s management would need to consider a reduction in quarterly cash distributions in order to reduce AmeriGas’ leverage ratios and increase its distribution coverage ratio to support its long-term financial health and promote its future cash distribution growth potential.

 

   

The financial presentations and the opinion of TPH to the GP Audit Committee on April 1, 2019, that, as of that date, based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations of the review undertaken by TPH in connection with the preparation of its opinion as set forth therein, the Merger Consideration (as defined in “—Opinion of the Financial Advisor to the GP Audit Committee”) to be paid to the Unaffiliated AmeriGas Unitholders in the merger pursuant to the merger agreement was fair from a financial point of view to such Unaffiliated AmeriGas Unitholders.

 

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The merger consideration, with an implied value of $35.325 per AmeriGas common unit based upon the closing price of UGI Shares on April 1, 2019 (the last trading day before the announcement of the merger agreement) represents:

 

   

a 13.5% premium to the closing price of AmeriGas common units on April 1, 2019;

 

   

a 21.9% premium to the closing price of AmeriGas common units based on the 30-day volume-weighted average price for AmeriGas common units for the period ending April 1, 2019; and

 

   

an 18.1% premium to the closing price of AmeriGas common units on January 28, 2019, the date of UGI’s initial proposal.

 

   

The following procedural safeguards involved in the negotiation of the merger agreement:

 

   

The GP Audit Committee consisted solely of directors who are not officers, employees or controlling shareholders of UGI or its affiliates and who satisfied the requirements under the AmeriGas partnership agreement and the Charter of the GP Audit Committee for service on the GP Audit Committee.

 

   

The GP Audit Committee was charged with evaluating and negotiating the terms and conditions of the proposed merger on behalf of AmeriGas and the Unaffiliated AmeriGas Unitholders, with the power to decline to pursue a transaction, and the GP Board resolved not to approve the proposed merger without the prior approval and recommendation of the GP Audit Committee.

 

   

Other than with respect to any awards under the AmeriGas LTIPs described below in “—Interests of Directors and Executive Officers of the General Partner in the Merger—Treatment of AmeriGas Equity-Based Awards,” the members of the GP Audit Committee will not personally benefit from completion of the merger in a manner different from the Unaffiliated AmeriGas Unitholders.

 

   

The members of the GP Audit Committee were appropriately compensated for their services, which compensation was set by AmeriGas with guidance from an independent compensation consultant and consistent with market standards. In addition, the compensation for the members of the GP Audit Committee was in no way contingent on their approving the merger agreement or the merger.

 

   

The terms and conditions of the merger agreement and the merger were determined through arm’s-length negotiations between the GP Audit Committee and UGI and their respective representatives and advisors.

 

   

The merger consideration represents a significant improvement over UGI’s initial proposal on January 28, 2019 of 0.500 UGI Shares and $4.03 in cash for each AmeriGas common unit, or a 7.1% premium to the closing price of AmeriGas common units on January 25, 2019.

 

   

The GP Audit Committee retained and was advised by independent, experienced and qualified advisors, consisting of Potter Anderson as legal counsel and TPH as financial advisor.

 

   

No member of the GP Audit Committee was requested to serve on the UGI Board following the merger.

 

   

The terms of the merger agreement, principally:

 

   

Unaffiliated AmeriGas Unitholders will receive 0.500 UGI Shares and $7.63 in cash, subject to the election and proration mechanics in the merger agreement, per outstanding AmeriGas common unit.

 

   

The merger agreement provides that, subject to proration, each Unaffiliated AmeriGas Unitholder may elect to receive all cash, all UGI Shares or a combination of cash and UGI Shares, thereby

 

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providing Unaffiliated AmeriGas Unitholders the choice of investing in the resulting combined company following the merger or receiving a higher percentage of cash for their AmeriGas common units to satisfy tax obligations resulting from the merger or to use for other purposes.

 

   

The fact that the merger is subject to approval by the AmeriGas Unitholders, including a significant portion of the Unaffiliated AmeriGas Unitholders.

 

   

The requirement that the General Partner will enter into the Support Agreement, which ensures that the General Partner will vote all of its AmeriGas common units in favor of the merger.

 

   

UGI has an obligation to join the Support Agreement in the event that it acquires AmeriGas common units between signing and closing.

 

   

UGI beneficially owns approximately 25.5% of the AmeriGas common units and thus does not control the outcome of the AmeriGas Unitholder vote.

 

   

AmeriGas Unitholders will be entitled to receive regular quarterly distributions of not less than $0.95 per quarter up to and including the quarter immediately preceding the quarter in which the closing occurs.

 

   

The provisions allowing the GP Audit Committee to change its recommendation of the merger agreement in the event of a superior proposal from a third party or an intervening event, if the GP Audit Committee makes a good faith determination that the failure to change its recommendation would be inconsistent with its duties under applicable law, as modified by the AmeriGas partnership agreement, and complies with the terms of the merger agreement.

 

   

The provisions allowing AmeriGas to provide information to, and participate in discussions and negotiations with, a third party in response to an unsolicited alternative proposal, which may, in certain circumstances, result in a superior proposal.

 

   

The operating covenants to which UGI and its affiliates (other than the General Partner) are subject in the merger agreement provide protection to the Unaffiliated AmeriGas Unitholders by restricting UGI’s ability to take certain actions prior to the closing of the merger that could reduce the value of the UGI Shares received by the Unaffiliated AmeriGas Unitholders in the merger.

 

   

The merger agreement contains only limited conditions and exceptions to the closing conditions, including the absence of any required regulatory approvals.

 

   

Under the terms of the merger agreement, prior to the effective time, UGI and the General Partner are prohibited from revoking or diminishing the authority of the GP Audit Committee or from removing any member of the GP Audit Committee without the consent of the GP Audit Committee prior to the closing of the merger.

 

   

The merger agreement requires GP Audit Committee approval with respect to the mutual agreement by UGI and AmeriGas to terminate the merger agreement, and any amendment to, waiver of, or consent under the merger agreement by AmeriGas requires the GP Audit Committee’s approval in writing.

 

   

The benefits from the merger, including:

 

   

The cash component of the merger consideration, which provides more optionality and value certainty for Unaffiliated AmeriGas Unitholders by ensuring immediate value to the Unaffiliated AmeriGas Unitholders and which is estimated to cover a significant portion of the resulting tax burden for the average Unaffiliated AmeriGas Unitholder.

 

   

The UGI Shares portion of the merger consideration, which represents a substantial portion of the consideration payable to Unaffiliated AmeriGas Unitholders, is fixed and therefore the value of the consideration payable to the Unaffiliated AmeriGas Unitholders will increase in the event that the market price of UGI Shares increases prior to the closing of the merger.

 

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Unaffiliated AmeriGas Unitholders’ receipt of equity ownership in a corporate entity with greater financial health, as measured by leverage and dividend coverage, which provides greater certainty of maintenance of current dividend payments and generates equity investor confidence.

 

   

Unaffiliated AmeriGas Unitholders’ receipt of equity ownership in an entity with a diversified platform of assets, including regulated natural gas utility and international operations, and a substantially lower cost of capital. UGI has a long history of dividend growth and is expected to pursue accretive capital projects and acquisitions that would provide for continued dividend growth in the future. UGI plans to increase its dividend by 15% (from $0.26 to $0.30 per UGI Share) in respect of its second fiscal quarter and by an additional 10% (from $0.30 to $0.325 per UGI Share) following the closing of the merger.

 

   

Unaffiliated AmeriGas Unitholders’ receipt of equity ownership in a corporate entity that is less exposed to weather volatility than AmeriGas, given UGI’s significant ownership of international propane operations and non-propane business segments (midstream and regulated natural gas utility operations).

 

   

Unaffiliated AmeriGas Unitholders’ receipt of equity ownership in a corporate entity with traditional fiduciary duties owed to stockholders, the ability to vote in the election of directors and a simplified capital structure relative to an MLP.

 

   

The expectation that the combined company will have an enhanced credit profile and greater access to the capital markets.

 

   

The expectation that the merger will result in an increase in the tax basis of the portion of AmeriGas’ assets underlying the AmeriGas common units surrendered in the merger, which is expected to produce substantial tax depreciation deductions and reduce the tax burden of the resulting combined company following the merger, thereby facilitating potentially higher dividends over time, which will in part benefit Unaffiliated AmeriGas Unitholders receiving UGI Shares in the merger.

 

   

The receipt by Unaffiliated AmeriGas Unitholders of a tax basis in the UGI common shares received as merger consideration equal to its fair market value.

 

   

The public listing of UGI Shares, which will allow the Unaffiliated AmeriGas Unitholders to either sell the UGI Shares they receive in the merger for cash or retain the UGI Shares they receive and participate in the equity value of UGI, including the potential future growth and synergies resulting from the merger.

 

   

UGI’s status as a corporation and its size following the merger provide a number of benefits relative to AmeriGas’ MLP structure, including that corporations attract a broader set of investors as compared to MLPs because certain types of institutional investors face prohibitions or limitations on investing in entities other than corporations and UGI Shares will provide greater liquidity than AmeriGas common units because of the larger average daily trading volume of UGI Shares as a result of the broader investor base and larger public float.

 

   

The elimination of the burden of the economic general partner interest, including the incentive distribution rights payable to the General Partner, which in the future could have potentially made it more challenging for AmeriGas to pursue accretive acquisitions and relatively more expensive to fund its capital expenditure program.

 

   

The expectation that the merger will strengthen and enhance the pro forma balance sheet of the pro forma entity by utilizing higher retained cash flow to accelerate deleveraging or fund capital expenditures.

 

   

The potential for cost and revenue synergies, in particular as a result of facilitating the alignment of AmeriGas’ domestic propane business with UGI’s international propane business.

 

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The GP Audit Committee considered the following factors to be generally negative or unfavorable in arriving at its determinations and approvals, and the related recommendation to the GP Board:

 

   

The absence of certain procedural safeguards, including:

 

   

The Unaffiliated AmeriGas Unitholders are not entitled to appraisal rights under the merger agreement, the AmeriGas partnership agreement or the DRULPA.

 

   

The GP Audit Committee was not authorized to and did not conduct an auction process or other solicitation of interest from third parties for the acquisition of AmeriGas. Because UGI indirectly controls AmeriGas through its indirect ownership of the General Partner and UGI indicated that it desired to retain its controlling interest in AmeriGas, it was not productive or practical to conduct a meaningful process to solicit interest in the acquisition of assets or control of AmeriGas from third parties.

 

   

Certain executive officers and directors of UGI and the General Partner have interests in the merger that are different from, or in addition to, the interests of the Unaffiliated AmeriGas Unitholders. For the avoidance of doubt, such directors and executive officers are not included within the definition of “Unaffiliated AmeriGas Unitholders.” See “—Interests of Directors and Executive Officers of the General Partner in the Merger.”

 

   

Although the merger is subject to approval by holders of a majority of the outstanding AmeriGas common units, the vote includes AmeriGas common units owned by the General Partner, which has entered into the Support Agreement obligating the General Partner to vote its AmeriGas common units in favor of the merger agreement and the transactions contemplated thereby, including the merger, and the merger is not conditioned on the separate approval of the holders of a majority of the AmeriGas common units held by the Unaffiliated AmeriGas Unitholders.

 

   

Certain terms of the merger agreement, principally:

 

   

The provisions limiting the ability of the GP Audit Committee to solicit, or to consider unsolicited, offers from third parties for AmeriGas.

 

   

The operating covenants to which AmeriGas is subject in the merger agreement restrict AmeriGas from taking certain actions prior to the closing of the merger that could be beneficial to AmeriGas and the Unaffiliated AmeriGas Unitholders.

 

   

AmeriGas’ obligation to pay a termination fee to UGI in connection with the termination of the merger agreement as a result of a failed vote of the AmeriGas Unitholders due to a change in recommendation by the GP Audit Committee.

 

   

The provisions obligating AmeriGas to hold a special meeting of the AmeriGas Unitholders to vote on the merger even if the GP Audit Committee changes its recommendation to unitholders.

 

   

AmeriGas’ obligation to pay UGI’s expenses in certain circumstances.

 

   

The negative impact or potential consequences of the merger:

 

   

The UGI Shares portion of the merger consideration, which represents a substantial portion of the consideration payable to Unaffiliated AmeriGas Unitholders, is fixed and therefore the value of the consideration payable to the Unaffiliated AmeriGas Unitholders will decrease in the event that the market price of UGI Shares decreases prior to the closing of the merger.

 

   

The Unaffiliated AmeriGas Unitholders will receive UGI Shares that are expected, throughout management’s forecast period, to pay a significantly lower dividend per share as compared to the forecasted distributions per unit on AmeriGas common units on a standalone basis during the same period, even taking into account a possible distribution cut.

 

   

The merger will be a taxable transaction to the Unaffiliated AmeriGas Unitholders for U.S. federal and certain state income tax purposes and accordingly the Unaffiliated AmeriGas Unitholders may

 

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recognize taxable gains in the transaction. Depending on each Unaffiliated AmeriGas Unitholder’s individual tax situation and elections, as well as the effects of proration under the merger agreement, the amount of cash received by the AmeriGas Unitholder may not be sufficient to satisfy that unitholder’s tax obligations resulting from the merger. However, the Unaffiliated AmeriGas Unitholders’ aggregate tax obligations resulting from the merger are expected to be mitigated to some extent because many of the unitholders have suspended passive losses available to offset a substantial portion of the taxable gain that will be recognized in the merger.

 

   

For many Unaffiliated AmeriGas Unitholders, the portion of the dividends on UGI Shares that constitutes taxable income will likely be higher than the portion of their distributions on AmeriGas common units that constituted taxable income.

 

   

Following the merger, the income of the resulting combined entity will be subject to taxation at both the combined company and shareholder levels for U.S. federal and state income tax purposes, while the income of AmeriGas is currently subject to only one level of tax (at the unitholder level). However, the reduced corporate income tax rates implemented by tax reform enacted by the TCJA in December 2017 slightly narrowed the differential between the overall tax imposed on earnings from corporations and earnings from partnerships.

 

   

The implied value of $35.325 as of April 1, 2019 of the consideration to be paid to the Unaffiliated AmeriGas Unitholders, consisting of 0.500 UGI Shares and $7.63 in cash for each AmeriGas common unit represents a 3.2% discount to the 30-day volume-weighted average price for AmeriGas common units for the period ending December 3, 2018.

 

   

The Unaffiliated AmeriGas Unitholders will be forgoing the potential benefits that would be realized by remaining AmeriGas Unitholders on a standalone basis. In particular, Unaffiliated AmeriGas Unitholders will receive equity ownership in a corporate entity that is subject to taxation at both the corporate and equityholder level, as opposed to the pass-through nature of AmeriGas due to its structure as a master limited partnership.

 

   

AmeriGas has incurred and will continue to incur significant transaction costs and expenses in connection with the proposed merger, whether or not the merger is completed.

 

   

There is a risk that the potential benefits to be realized in the merger might not be fully realized, or might not be realized within the expected time period.

 

   

Litigation may occur in connection with the merger and any such litigation may result in significant costs and a diversion of management’s focus.

 

   

The Support Agreement obligates the General Partner to vote its AmeriGas common units in favor of the merger agreement, even in the event the GP Audit Committee no longer supports approval of the merger agreement.

 

   

There is risk that the merger might not be completed in a timely manner, or that the merger might not be consummated at all as a result of a failure to satisfy the conditions contained in the merger agreement, and a failure to complete the merger could negatively affect the trading price of AmeriGas common units or could result in significant costs and disruption to AmeriGas’ normal business.

After taking into account all of the factors set forth above, as well as others, the GP Audit Committee concluded that the potential benefits of the merger outweighed any negative or unfavorable considerations and determined that the merger agreement and the transactions contemplated thereby are fair and reasonable to, and in the best interests of, AmeriGas and the Unaffiliated AmeriGas Unitholders.

In making its determination and approvals, and the related recommendation to the GP Board, the GP Audit Committee considered the current and historical market prices of the AmeriGas common units; however, it was

 

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the belief of the GP Audit Committee that market trends do not necessarily reflect AmeriGas’ underlying business or financial condition. In making its determination and approvals, and the related recommendation to the GP Board, the GP Audit Committee did not consider the liquidation value of the assets of AmeriGas or any of its subsidiaries because the GP Audit Committee believed that liquidation value was not a material indicator of the value of AmeriGas. In addition, the GP Audit Committee did not consider AmeriGas’ net book value, which is defined as total assets minus total liabilities, because the GP Audit Committee believed that net book value was not a material indicator of the value of AmeriGas as a going concern. The GP Audit Committee expressly adopted TPH’s opinion and financial analyses. Other than the communication from Company A, which did not include any indication of valuation or specific transaction terms, the GP Audit Committee was not aware of, and thus did not consider, any firm offers or proposals made by any unaffiliated person during the past two years for: (i) a merger or consolidation of AmeriGas with another company, (ii) the sale or transfer of all or substantially all of AmeriGas’ assets or (iii) the purchase of AmeriGas securities that would enable such person to exercise control of or significant influence over AmeriGas. The GP Audit Committee is not aware of, and thus did not consider, any purchases by AmeriGas of AmeriGas common units during the past two years.

The GP Audit Committee did not retain an unaffiliated representative to act solely on behalf of the Unaffiliated AmeriGas Unitholders for purposes of negotiating the terms of the merger agreement. The GP Audit Committee believes that it was not necessary to retain an unaffiliated representative to act solely on behalf of the Unaffiliated AmeriGas Unitholders for purposes of negotiating the terms of the merger agreement because the GP Audit Committee was charged with representing the interests of AmeriGas and the Unaffiliated AmeriGas Unitholders, it consisted solely of directors who are not officers or controlling equityholders of AmeriGas or the UGI Filing Parties, it engaged independent financial and legal advisors to act on its behalf and it was actively involved in deliberations and negotiations regarding the merger on behalf of the Unaffiliated AmeriGas Unitholders.

The foregoing discussion of the factors considered by the GP Audit Committee is not intended to be exhaustive, but provides an overview of material factors that the GP Audit Committee considered. In view of the variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the GP Audit Committee did not find it useful and did not attempt to quantify or assign any relative or specific weights to the various factors considered in making its determination and recommendation. In addition, individual members of the GP Audit Committee may have given differing weights to different factors. Overall, the GP Audit Committee believed that the positive factors supporting the merger outweighed the negative factors it considered.

The GP Board

The GP Board consists of eleven directors: (i) eight of whom are independent (Marvin O. Schlanger, Brian R. Ford, John R. Hartmann, Frank S. Hermance, William J. Marrazzo, Anne Pol, Pedro A. Ramos and K. Richard Turner) and (ii) three of whom are executive officers and/or directors of UGI or its affiliates, including executive officers of the General Partner. As such, the directors on the GP Board may have different interests in the merger than AmeriGas Unitholders. For a discussion of these and other interests of the members of the GP Board in the merger, see “—Interests of Directors and Executive Officers of the General Partner in the Merger.” On April 1, 2019, the GP Board, after considering the factors discussed below, including the unanimous determination and recommendation of the GP Audit Committee, unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair and reasonable to, and in the best interests of, AmeriGas and the Unaffiliated AmeriGas Unitholders, (ii) approved the merger agreement, the execution, delivery and performance of the merger agreement and the transactions contemplated thereby, including the merger, and (iii) resolved to submit the merger agreement and the merger to a vote of the AmeriGas Unitholders and recommend approval of the merger agreement and the transactions contemplated thereby, including the merger, by the AmeriGas Unitholders.

In determining that the merger agreement and the transactions contemplated thereby, including the merger, are fair and reasonable to, and in the best interests of, AmeriGas and the Unaffiliated AmeriGas Unitholders, and

 

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approving the merger agreement, the execution, delivery and performance of the merger agreement and the transactions contemplated by the merger agreement, including the merger, and recommending approval of the merger agreement and the transactions contemplated thereby, including the merger, the GP Board considered a number of factors, including the following material factors: (i) the unanimous approval and recommendation of the GP Audit Committee and (ii) the factors considered by the GP Audit Committee, including the material factors considered by the GP Audit Committee described under “—Reasons for Recommending Approval of the Merger” above.

In doing so, the GP Board expressly adopted the analysis of the GP Audit Committee, which is discussed above. In addition, under the SEC rules governing “going private” transactions, AmeriGas is engaged in a “going private” transaction with respect to the merger and, therefore, is required to express its position as to the fairness of the merger to the Unaffiliated AmeriGas Unitholders. The GP Audit Committee and the GP Board, on behalf of AmeriGas, are making the following statements solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The GP Audit Committee and the GP Board, on behalf of AmeriGas, on the basis of the factors described above, believe that the merger (which is the Rule 13e-3 transaction for which a Schedule 13E-3 transaction statement was filed with the SEC) is both substantively and procedurally fair to the Unaffiliated AmeriGas Unitholders.

The foregoing discussion of the information and factors considered by the GP Board is not intended to be exhaustive, but includes material factors that the GP Board considered. In view of the variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the GP Board did not find it useful and did not attempt to quantify or assign any relative or specific weights to the various factors considered in making its determination and recommendation. The GP Board approved and recommended that AmeriGas Unitholders approve the merger agreement and the merger based upon the totality of the information presented to and considered by the GP Board.

The merger agreement and the transactions contemplated thereby, including the merger, were approved by the GP Board, following the recommendation of the GP Audit Committee, as described above in the section entitled “—Reasons for Recommending Approval of the Merger.”

Opinion of the Financial Advisor to the GP Audit Committee

The GP Audit Committee retained TPH to act as its financial advisor in connection with evaluating the proposed merger. At the request of the GP Audit Committee, at a meeting of the GP Audit Committee held on April 1, 2019, TPH rendered its oral opinion to the GP Audit Committee that, as of April 1, 2019, based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations of the review undertaken by TPH in connection with the preparation of its opinion as set forth therein, the Merger Consideration (as defined below) to be paid to the Unaffiliated AmeriGas Unitholders in the merger pursuant to the merger agreement was fair from a financial point of view to such Unaffiliated AmeriGas Unitholders. TPH subsequently confirmed its oral opinion in writing, dated April 1, 2019, to the GP Audit Committee. As used in this section and other portions of this proxy statement/prospectus referring to TPH’s opinion or analysis, the term “Merger Consideration” means, for each issued and outstanding AmeriGas common unit (other than any AmeriGas common units owned by UGI or any of its subsidiaries or by the General Partner), the right to receive pursuant to the merger, at the election of the holder thereof and subject to certain limitations and proration procedures set forth in the merger agreement (as to which TPH expressed no opinion), one of the following: (a) $35.325 in cash (rounded up to the nearest whole cent after taking into account all Cash Election Units exchanged by each holder), (b) 0.6378 UGI Shares or (c) $7.63 in cash and 0.500 UGI Shares (with (a), (b) and (c), taken in the aggregate).

The opinion speaks only as of the date it was rendered and not as of the date the merger and the other transactions contemplated by the merger agreement will be completed or any other date. The opinion does not reflect changes that may occur or may have occurred after April 1, 2019, which could alter the facts and

 

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circumstances on which TPH’s opinion was based. It is understood that subsequent developments or information of which TPH is, or was, not aware may affect TPH’s opinion, but TPH does not have any obligation to update, revise or reaffirm its opinion.

TPH’s opinion was directed to the GP Audit Committee (in its capacity as such), and only addressed the fairness from a financial point of view, as of the date of the opinion, to the Unaffiliated AmeriGas Unitholders of the Merger Consideration to be paid to such Unaffiliated AmeriGas Unitholders in the merger pursuant to the merger agreement. TPH’s opinion did not address any other term, aspect or implication of the merger agreement or other transactions contemplated thereby, including the merger. The full text of TPH’s opinion, which describes, among other things, the assumptions made, procedures followed, matters considered, and qualifications and limitations of the review undertaken by TPH in rendering its opinion, is attached as Annex B to this proxy statement/prospectus. The summary of TPH’s opinion set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion. The Unaffiliated AmeriGas Unitholders are urged to read TPH’s opinion carefully and in its entirety. However, neither TPH’s written opinion nor the summary of such opinion and the related analyses set forth in this proxy statement/prospectus are intended to be, and they do not constitute, a recommendation to the holders of AmeriGas common units or any other persons in respect of the merger, including as to how any Unaffiliated AmeriGas Unitholders or any other holders of AmeriGas common units should vote or act with respect to the merger or any other matter.

In connection with rendering its opinion and performing its related financial analyses, TPH reviewed, among other things:

 

   

a draft of the merger agreement dated March 31, 2019;

 

   

certain publicly available financial statements and other business, operating and financial information, including research analyst reports, with respect to AmeriGas and UGI;

 

   

certain other communications from AmeriGas and UGI to their respective unitholders or stockholders;

 

   

certain internal financial information and forecasts for AmeriGas and UGI prepared by the senior management of the General Partner and UGI, respectively, and certain internal financial information and forecasts for UGI pro forma for consummation of the merger prepared by the senior management of UGI, as adjusted in conjunction with and at the direction of the GP Audit Committee for financial information and forecasts with respect to AmeriGas prepared by the senior management of the General Partner, in each case prepared together with sensitivities thereto developed in conjunction with and at the direction of the GP Audit Committee (each such set of internal financial information and forecasts, together with the assumptions upon which it was based, a “Forecast” and, collectively, the “Forecasts”); and

 

   

certain synergies projected by the management of UGI to result from the merger (as used in this section, the “Synergies”).

TPH also held discussions with members of the senior managements of the General Partner and UGI regarding their assessment of the strategic rationale for, and the potential benefits of, the merger and the past and current business operations, financial condition and future prospects of their respective entities and of the surviving entity. In addition, TPH reviewed the reported price and trading activity for the UGI Shares and the AmeriGas common units, compared certain financial and stock market information for AmeriGas and UGI with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the midstream energy sector and performed such other studies and analyses, and considered such other factors, as TPH considered appropriate. The Forecasts and Synergies reflect certain assumptions regarding future weather patterns, capital expenditures and other matters that are subject to significant uncertainty and that, if different than assumed, could have a material impact on TPH’s analysis and its opinion. As noted in TPH’s written opinion, senior management of the General Partner may have

 

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differing beneficial or other pecuniary interests in the equity securities and future financial performance of AmeriGas, on the one hand, and the surviving entity, UGI and its affiliates, on the other.

For purposes of its opinion, TPH assumed and relied upon, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial, accounting, legal, tax, regulatory and other information provided to, discussed with or reviewed by or for TPH, or publicly available. In that regard, TPH assumed with the GP Audit Committee’s consent that the Forecasts and Synergies were reasonably prepared on a basis reflecting the best currently available estimates and judgments of managements of the General Partner and UGI, and that such Forecasts and Synergies provide a reasonable basis upon which to evaluate the merger. TPH expressed no view or opinion with respect to the Forecasts, Synergies or the assumptions on which they were based and further assumed, among other things, that (i) the executed merger agreement (together with any exhibits and schedules thereto) would not differ in any respect material to its analyses or opinion from the draft version it examined, referenced above, (ii) the representations and warranties of all parties to the merger agreement and all other related documents and instruments that are referred to therein were true and correct in all material respects, (iii) each party to the merger agreement and such other related documents and instruments would fully and timely perform all of the covenants and agreements required to be performed by such party in all material respects, (iv) all conditions to the consummation of the merger would be satisfied without material amendment or waiver thereof, (v) the merger would be consummated in a timely manner in accordance with the terms described in the merger agreement and such other related documents and instruments, without any material amendments or modifications thereto and (vi) all governmental, regulatory or other consents or approvals necessary for the consummation of the merger (including AmeriGas Unitholder Approval) would be obtained without, in the case of each of the foregoing clauses (i) through (vi), any adverse effect on AmeriGas, UGI, Merger Sub, the holders of AmeriGas common units or the expected benefits of the merger in any way meaningful to TPH’s analyses. In addition, TPH did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of AmeriGas or any of its subsidiaries or UGI or any of its subsidiaries, nor did TPH evaluate the solvency or fair value of AmeriGas or UGI under any state or federal laws relating to bankruptcy, insolvency or similar matters, and TPH has not been furnished with any such evaluation or appraisal. TPH’s opinion did not address any legal, regulatory, tax or accounting matters.

The estimates contained in TPH’s analyses and the results from any particular analysis are not necessarily indicative of future results, which may be significantly more or less favorable than suggested by any analysis. In addition, analyses relating to the value of businesses or assets neither purport to be appraisals nor do they necessarily reflect the prices at which businesses or assets may actually be sold. Accordingly, TPH’s analyses and estimates are inherently subject to substantial uncertainty.

In arriving at its opinion, TPH did not attribute any particular weight to any particular analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Several analytical methodologies were employed by TPH in its analyses, and the cases and sensitivities comprising the Forecasts and Synergies were evaluated collectively. No one single method of analysis, forecast case or sensitivity should be regarded as determinative of the overall conclusion reached by TPH. Each analytical technique has inherent strengths and weaknesses, and the nature of the available information may further affect the value of particular techniques. Accordingly, TPH believes that its analyses must be considered as a whole and that selecting portions of its analyses and of the factors considered by it, without considering all analyses and all factors in their entirety, could create a misleading or incomplete view of the evaluation process underlying its opinion. The conclusion reached by TPH, therefore, is based on the application of TPH’s experience and judgment to all analyses and factors considered by TPH, taken as a whole.

TPH’s opinion did not address the underlying business decision of the GP Audit Committee or AmeriGas to engage in the merger, the relative merits of the merger as compared to any other alternative transaction that might have been available to AmeriGas or the likelihood of consummation of the merger. TPH’s opinion addressed only the fairness from a financial point of view, as of the date thereof, of the Merger Consideration to

 

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be paid to the Unaffiliated AmeriGas Unitholders in the merger pursuant to the merger agreement. TPH did not express any view on, and its opinion did not address, any particular election with respect to the Merger Consideration or any limitations or proration procedures in respect of the Merger Consideration, any other term or aspect of the merger agreement or the merger or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the merger, including, without limitation, the fairness of the merger to, or any consideration received in connection therewith by, creditors or other constituencies of AmeriGas or UGI; nor as to the fairness of the amount or nature of any consideration or compensation to be paid or payable to any of the officers, directors or employees of AmeriGas, the General Partner or UGI, or any class of such persons, in connection with the merger, whether relative to the Merger Consideration to be paid to the Unaffiliated AmeriGas Unitholders pursuant to the merger agreement or otherwise. TPH did not express any opinion as to the price at which the AmeriGas common units, UGI Shares or any other securities will trade at any time.

TPH’s opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to TPH as of the date of its opinion. TPH assumed no obligation to update, revise or reaffirm its opinion and expressly disclaimed any responsibility to do so based on circumstances, developments or events that occur, or of which TPH becomes aware, after April 1, 2019. TPH’s advisory services and its opinion were provided for the information and assistance of the GP Audit Committee in connection with its consideration of the merger, and such opinion does not constitute a recommendation to the GP Audit Committee, the GP Board, the holders of AmeriGas common units or any other persons in respect of the merger, including as to how any Unaffiliated AmeriGas Unitholder or any other holders of AmeriGas common units should vote or act with respect to the merger or any other matter. TPH’s opinion was reviewed and approved by TPH’s fairness opinion committee.

Summary Financial Analyses

The following is a summary of the material financial analyses performed by TPH in connection with the preparation of its opinion and reviewed with the GP Audit Committee on April 1, 2019. Unless the context indicates otherwise, enterprise values and equity values used in the selected companies analysis described below were calculated using the closing price of the AmeriGas common units and the equity securities of the selected companies listed below as of March 29, 2019, and transaction values for the selected transactions analysis described below were calculated on an enterprise value basis based on the value of the equity consideration and other public information available at the time of the relevant transaction’s announcement. The analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses performed, the tables must be considered together with the textual summary of the analyses. Considering the tables below without considering the textual summary of the analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of TPH’s financial analyses.

For purposes of its analyses, TPH reviewed a number of financial metrics including:

 

   

Enterprise value—generally the value as of a specified date of the relevant company’s outstanding equity securities (taking into account its options and other outstanding convertible securities) plus the value as of such date of its net debt (the value of its outstanding indebtedness, preferred stock and capital lease obligations less the amount of cash on its balance sheet).

 

   

EBITDA—generally the amount of the relevant company’s earnings before interest, taxes, depreciation and amortization for a specified time period.

 

   

Distributable cash flow or DCF—generally EBITDA less cash interest expense, maintenance capital expenditures, non-cash unit based compensation and other adjustments.

 

   

Distribution yield—generally the distribution per unit or share divided by the unit or share price.

 

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No company or transaction used in the analyses of companies or transactions summarized below is identical or directly comparable to AmeriGas, UGI or the merger. As a consequence, mathematical derivations (such as the low, median and high) of financial data are not by themselves meaningful, and these analyses must take into account differences in the financial and operating characteristics of the selected publicly traded companies and differences in the structure and timing of the selected transactions and other factors that would affect the public trading value and acquisition value of the companies considered.

Forecasts

The Forecasts evaluated in TPH’s analyses with respect to AmeriGas included three operational cases (the “AmeriGas operational cases”), which are set forth in “—Unaudited Financial Projections of UGI and AmeriGas—Unaudited Financial Projections of AmeriGas”:

 

   

a case for AmeriGas prepared by the senior management of the General Partner (the “AmeriGas case”);

 

   

a case assuming recent historical weather patterns would continue through the forecast period, which was prepared by TPH in conjunction with and at the direction of the GP Audit Committee and reviewed by the senior management of the General Partner (the “historical weather case”); and

 

   

a case incorporating a capital investment program and related projected benefits to AmeriGas’ customer service operations, which was prepared by the senior management of the General Partner (the “capital investment case”).

In conducting its analyses and evaluating the AmeriGas operational cases described above, TPH also considered two distribution policies for AmeriGas, each at the direction of the GP Audit Committee and reviewed by the senior management of the General Partner:

 

   

a distribution policy under which AmeriGas would continue to distribute $3.80 per common unit on an annual basis throughout the forecast period (the “$3.80 distribution policy”), which is reflected in the AmeriGas operational cases in “—Unaudited Financial Projections of UGI and AmeriGas—Unaudited Financial Projections of AmeriGas”; and

 

   

a distribution policy assuming 1.2x distribution coverage for fiscal year 2019 and flat common unit distribution levels thereafter throughout the forecast period, subject to distribution increases if a target leverage ratio of 4.0x debt to EBITDA and 1.2x distribution coverage were achieved, which is reflected in the AmeriGas operational cases in “—Unaudited Financial Projections of UGI and AmeriGas—Unaudited Financial Projections of AmeriGas—AmeriGas Distributions and DCF per AmeriGas common unit at the Targeted Distribution Policy.”

The Forecasts evaluated in TPH’s analyses with respect to UGI included one operational case and one sensitivity case (the “UGI cases”):

 

   

a case for UGI prepared by the senior management of UGI and updated by TPH to reflect the actual financial results of UGI for the first four months of fiscal year 2019, which updates were provided by the senior management of UGI (the “UGI 4+8 case”), as adjusted with respect to AmeriGas in conjunction with and at the direction of the GP Audit Committee for each of the AmeriGas case (the “pro forma UGI 4+8 case”), the historical weather case (the “pro forma UGI historical weather case”) and the capital investment case (the “pro forma UGI capital investment case” and, collectively, the “pro forma UGI cases”); and

 

   

a sensitivity for UGI prepared by TPH in conjunction with and at the direction of the GP Audit Committee, which adjusted the pro forma UGI 4+8 case, the pro forma UGI historical weather case and the pro forma UGI capital investment case to reflect a downward revision by 15% of the future earnings per UGI Share in years beyond 2019, which approximated the amount of the downward revision to 2019 earnings per UGI Share estimates provided by the senior management of UGI to the

 

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GP Audit Committee (the “pro forma UGI sensitivity 4+8 case,” the “pro forma UGI sensitivity historical weather case” and the “pro forma UGI sensitivity capital investment case,” respectively, and collectively the “pro forma UGI sensitivity cases”).

The UGI cases include EBITDA synergies of $2.5 million in 2019 and $5.0 million in each of the years 2020 to 2022. For further information regarding the AmeriGas operational cases and the UGI cases, see “—Unaudited Financial Projections of UGI and AmeriGas.”

AmeriGas Financial Analyses

Selected Company Analysis—AmeriGas

TPH reviewed and analyzed certain financial information including valuation multiples for selected companies deemed similar to AmeriGas, in one or more respects, using estimates of financial performance for the selected companies based on publicly available information and research analyst consensus estimates for the selected companies. The selected companies for AmeriGas were: (i) Buckeye Partners, L.P., GasLog Partners LP, Genesis Energy, L.P., Global Partners LP, Golar LNG Partners LP, Holly Energy Partners, L.P., KNOT Offshore Partners LP, Martin Midstream Partners L.P., NGL Energy Partners LP, NuStar Energy L.P., PBF Logistics LP, Summit Midstream Partners, LP, Sunoco LP, TC PipeLines, LP and USA Compression Partners, LP (the “Low Growth MLP Peers”); and (ii) Ferrellgas Partners, L.P., Suburban Propane Partners, L.P. and Superior Plus Corporation (the “Propane Distributor Peers” and, together with the Low Growth MLP Peers, the “AmeriGas Peers”). The information reviewed and compared included estimated distribution yield for the year 2019, or “2019E Distribution Yield,” unit price as a multiple of distributable cash flow per unit for the year 2018, or “2018A DCF/Unit,” and estimated distributable cash flow per unit for the years 2019 and 2020, or “2019E DCF/Unit” and “2020E DCF/Unit,” based on publicly available information and research analyst estimates for the AmeriGas Peers. The 2019E Distribution Yields were derived by dividing estimated distributions for the year 2019 by the unit price. The 2018A DCF/Unit multiples were derived by dividing the unit price by distributable cash flow per unit for the year 2018. The 2019E DCF/Unit multiples were derived by dividing the unit price by estimated distributable cash flow per unit for the year 2019. The 2020E DCF/Unit multiples were derived by dividing the unit price by estimated distributable cash flow per unit for the year 2020.

 

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The following table sets forth the data used in the selected company analysis:

 

     Price / DCF / Unit Multiple      Distributions
(Dividends)
Yield
 
     2018A      2019E      2020E      2019E  

Low Growth MLP Peers

           

Buckeye Partners, L.P.

     8.2x        9.2x        8.3x        8.8

GasLog Partners LP

     6.2x        10.9x        11.5x        9.9

Genesis Energy, L.P.

     9.4x        7.9x        7.1x        9.4

Global Partners LP

     5.6x        7.7x        7.5x        10.2

Golar LNG Partners LP

     6.9x        4.7x        4.8x        12.5

Holly Energy Partners, L.P.

     10.5x        10.1x        9.9x        10.0

KNOT Offshore Partners LP

     7.0x        7.1x        7.1x        11.0

Martin Midstream Partners L.P.

     9.3x        5.8x        6.2x        16.1

NGL Energy Partners LP

     8.9x        6.3x        6.3x        11.1

NuStar Energy L.P.

     7.9x        9.4x        8.3x        8.9

PBF Logistics LP

     9.6x        9.2x        8.6x        9.9

Summit Midstream Partners, LP

     4.5x        4.4x        4.0x        11.8

Sunoco LP

     7.0x        8.4x        8.4x        10.6

TC PipeLines, LP

     11.9x        8.2x        7.6x        7.0

USA Compression Partners, LP

     6.7x        6.9x        6.7x        13.5

Propane Distributor Peers

           

Ferrellgas Partners, L.P.

     NM        NM        NM        NM  

Suburban Propane Partners, L.P.

     7.0x        7.1x        6.8x        10.7

Superior Plus Corporation

     6.0x        6.7x        6.4x        6.3

AmeriGas (at transaction) (1)

     9.6x        9.1x        9.0x        10.8

AmeriGas (at transaction) (2)

     9.6x        9.6x        9.5x        10.8

 

(1)

Based on publicly available consensus analyst estimates.

(2)

Based on the AmeriGas case.

The resulting low, median and high data for the AmeriGas Peers and the corresponding data for AmeriGas were:

 

     Price / DCF / Unit      Distribution
Yield
 
     2018A      2019E      2020E      2019E  

Low Growth MLP Peers

           

Low

     4.5x        4.4x        4.0x        7.0

Median

     7.9x        7.9x        7.5x        10.2

High

     11.9x        10.9x        11.5x        16.1

Propane Distributor Peers

           

Low

     6.0x        6.7x        6.4x        6.3

Median (1)

     6.5x        6.9x        6.6x        8.5

High

     7.0x        7.1x        6.8x        10.7

AmeriGas (at transaction) (2)

     9.6x        9.1x        9.0x        10.8

AmeriGas (at transaction) (3)

     9.6x        9.6x        9.5x        10.8

 

(1)

Excludes Ferrellgas Partners, L.P.

(2)

Based on publicly available consensus analyst estimates.

(3)

Based on the AmeriGas case.

 

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Based upon the Price / DCF / Unit multiples observed in this analysis, TPH calculated an implied price per unit range for AmeriGas common units for each of the Forecasts reflected in the table below.

 

Trading Metric    Forecast    Minimum (1)      Maximum (2)  

$3.80 distribution policy

        

2018 Price/DCF

   AmeriGas case    $ 21.61      $ 37.03  

2018 Price/DCF

   Historical weather case    $ 21.61      $ 37.03  

2018 Price/DCF

   Capital investment case    $ 21.61      $ 37.03  

2019E Price/DCF

   AmeriGas case    $ 19.71      $ 35.76  

2019E Price/DCF

   Historical weather case    $ 19.71      $ 35.76  

2019E Price/DCF

   Capital investment case    $ 19.71      $ 35.76  

2020E Price/DCF

   AmeriGas case    $ 20.85      $ 33.87  

2020E Price/DCF

   Historical weather case    $ 19.82      $ 32.19  

2020E Price/DCF

   Capital investment case    $ 20.21      $ 32.82  

Targeted distribution policy

        

2019E Price/DCF

   AmeriGas case    $ 19.80      $ 35.91  

2019E Price/DCF

   Historical weather case    $ 19.80      $ 35.91  

2019E Price/DCF

   Capital investment case    $ 19.71      $ 35.76  

2020E Price/DCF

   AmeriGas case    $ 21.12      $ 34.31  

2020E Price/DCF

   Historical weather case    $ 20.22      $ 32.85  

2020E Price/DCF

   Capital investment case    $ 20.30      $ 32.97  

 

(1)

Minimum represents the tenth percentile of data set.

(2)

Maximum represents the ninetieth percentile of data set.

The implied price per unit ranges were compared to an implied transaction value of $35.34 per AmeriGas common unit, calculated assuming the UGI equity portion of the Merger Consideration had a value of $27.71 per share (0.5000x the closing price per UGI Share as of March 29, 2019) plus $7.63 in cash.

Selected Propane Transactions

TPH reviewed the financial terms of certain transactions since 2001 of acquisitions of propane distribution businesses greater than $150 million in transaction value that TPH deemed similar to the merger in one or more respects. The information reviewed and compared included the corresponding transaction value as a multiple of estimated EBITDA for the last twelve months (“LTM”) and the next twelve months (“NTM”) following announcement, based on publicly available information and research analyst estimates for those targets.

 

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The selected transactions were:

 

Buyer

   Seller    Target   Transaction
Value

(in millions)
    LTM
EBITDA

Multiple
    NTM
EBITDA

Multiple
 

Superior Plus Corporation

   NGL Energy Partners LP    Retail Propane Operations   $ 900       10.5x       10.7x  

DCC LPG

   NGL Energy Partners LP    Retail West     200       8.0x       7.1x  

SHV Energy N.V.

   American Midstream
Partners, L.P.
   Pinnacle Propane     170       7.0x       9.0x  

Superior Plus Corporation

   Gibson Energy Inc.    Canwest Propane     412       10.8x       12.3x  

World Fuel Services Corporation

   PAPCO, Inc.; Associated
Petroleum Products, Inc.
   Miscellaneous Fuel
Services
    230       NA       6.0x  

DCC LPG (1)

   Royal Dutch Shell plc    Butagaz     517       3.7x       3.8x  

UGI Corporation

   Total S.A.    Totalgaz SNC     580       NA       6.1x  

Suburban Propane Partners, L.P.

   Inergy, L.P.    Retail Propane Assets     1,800       9.1x       NA  

AmeriGas Partners, L.P.

   Energy Transfer Partners,

L.P.

   Heritage Propane
Operations
    2,890       11.4x       8.9x  

Inergy Propane, LLC

   Sterling Partners GP LLC    Liberty Propane     223       NA       6.2x  

Inergy, L.P.

   Star Gas Partners, L.P.    Star Gas Propane     475       9.6x       9.5x  

Ferrellgas Partners, L.P.

   Blue Rhino Corporation    —       343       10.0x       7.8x  

Suburban Propane Partners, L.P. (1)

   Agway Energy Products,
LLC; Agway Energy
Services, Inc; Agway

Energy Services PA, Inc.

   —       206       5.0x       6.0x  

Energy Transfer Company Ltd.

   Heritage Propane Partners
LP
   —       980       10.9x       8.3x  

AmeriGas Partners, L.P.

   NiSource Inc.    Columbia Propane     216       NA       NA  

 

(1)

These transactions were not incorporated into the data summarized below.

The resulting low, median and high data, determined by dividing the transaction value by LTM EBITDA and NTM EBITDA, as applicable, of the selected transactions were:

 

     Transaction Value
/ LTM EBITDA
     Transaction Value
/ NTM EBITDA
 

Reference Multiple

     

Low

     7.0x        6.0x  

Median

     10.0x        8.3x  

High

     11.4x        12.3x  

Based upon this analysis, TPH calculated an implied price per unit range for AmeriGas common units for each of the Forecasts reflected in the table below.

 

Transaction Metric    Forecast    Minimum      Maximum  

Purchase Price/LTM EBITDA

   AmeriGas case      $11.57        $41.16  

Purchase Price/LTM EBITDA

   Historical weather case      $11.57        $41.16  

Purchase Price/LTM EBITDA

   Capital investment case      $11.57        $41.16  

Purchase Price/NTM EBITDA

   AmeriGas case      $4.34        $45.95  

Purchase Price/NTM EBITDA

   Historical weather case      $3.89        $45.03  

Purchase Price/NTM EBITDA

   Capital investment case      $4.18        $45.62  

The implied price per unit ranges were compared to the proposed transaction value of $35.34 per AmeriGas common unit.

 

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Discounted Distribution Analysis

TPH calculated implied price per unit ranges of AmeriGas common units by discounting estimated distributions to AmeriGas Unitholders as of March 31, 2019. TPH applied discount rates ranging from 8.0% to 12.0% (based on, among other things, TPH’s judgment of the estimated range of the cost of equity based on an analysis of AmeriGas and the AmeriGas Peers) to the AmeriGas estimated distributions from April 2019 through September 2022 (as disclosed in “—Unaudited Financial Projections of UGI and AmeriGas—Unaudited Financial Projections of AmeriGas”). TPH applied distribution yield multiples ranging from 8.0% to 13.0% (selected by TPH by reference to, among other things, the distribution yield multiples for AmeriGas and the AmeriGas Peers in the analysis described above under “—Selected Company Analysis—AmeriGas”) and the same discount rate ranges to the estimated 2023 distributions for AmeriGas based on each of the operational cases, under each of the targeted distribution policy and the $3.80 distribution policy. Under the $3.80 distribution policy, the analysis resulted in implied price per unit ranges of AmeriGas common units of $30.63 to $47.94 based on the AmeriGas case, $30.63 to $47.94 based on the historical weather case and $30.63 to $47.94 based on the capital investment case. Under the targeted distribution policy, the analysis resulted in implied price per unit ranges of AmeriGas common units of $24.84 to $38.88 based on the AmeriGas case, $24.84 to $38.88 based on the historical weather case and $26.71 to $42.35 based on the capital investment case. The implied price per unit ranges were compared to the proposed transaction value of $35.34 per AmeriGas common unit.

Levered Distributable Cash Flow Analysis

TPH calculated implied price per unit ranges of AmeriGas common units by discounting estimated levered distributable cash flow to AmeriGas Unitholders as of March 31, 2019. TPH applied discount rates ranging from 8.0% to 12.0% (based on, among other things, TPH’s judgment of the estimated range of the cost of equity based on an analysis of AmeriGas and the AmeriGas Peers) to the AmeriGas estimated levered distributable cash flow from April 2019 through September 2022 (as disclosed in “—Unaudited Financial Projections of UGI and AmeriGas—Unaudited Financial Projections of AmeriGas”). TPH applied terminal Price / DCF multiples ranging from 6.0x to 10.0x (selected by TPH by reference to, among other things, the Price / DCF multiples for AmeriGas and the AmeriGas Peers in the analysis described above under “—Selected Company Analysis—AmeriGas”) and the same discount rate ranges to the estimated 2023 levered distributable cash flow for AmeriGas based on each of the AmeriGas operational cases, under each of the targeted distribution policy and the $3.80 distribution policy. Under the $3.80 distribution policy, the analysis resulted in implied price per unit ranges of AmeriGas common units of $26.27 to $40.71 based on the AmeriGas case, $24.91 to $38.52 based on the historical weather case and $27.10 to $42.35 based on the capital investment case. Under the targeted distribution policy, the analysis resulted in implied price per unit ranges of AmeriGas common units of $27.14 to $42.20 based on the AmeriGas case, $25.84 to $40.09 based on the historical weather case and $27.72 to $43.41 based on the capital investment case. The implied price per unit ranges were compared to the proposed transaction value of $35.34 per AmeriGas common unit.

UGI and Pro Forma UGI Financial Analyses

Selected Company Analysis—UGI

TPH reviewed and analyzed certain financial information including valuation multiples for selected companies deemed similar to UGI in one or more respects, using estimates of financial performance for the selected companies based on publicly available information and research analyst consensus estimates for the selected companies. The selected companies for UGI were: (i) Atmos Energy Corporation, Chesapeake Utilities Corporation, NiSource Inc., New Jersey Resources Corporation, Northwest Natural Holding Co., ONE Gas, Inc., Spire Inc. and Southwest Gas Holdings Inc. (collectively, the “LDC Peers”); (ii) Enbridge Inc., Kinder Morgan, Inc., SemGroup Corporation, Targa Resources Corp., Tallgrass Energy, LP and The Williams Companies, Inc. (collectively, the “C-Corp Midstream Peers”); and (iii) AmeriGas, Ferrellgas Partners LP, Suburban Propane Partners L.P. and Superior Plus Corporation (collectively, the “UGI Propane Distributor Peers” and, together

 

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with the LDC Peers and C-Corp Midstream Peers, the “UGI Peers”). The information, based on publicly available information and research analyst estimates for the UGI Peers, reviewed and compared included:

 

   

enterprise value as a multiple of estimated EBITDA for the years 2019 and 2020, or “2019E Enterprise Value/EBITDA” and “2020E Enterprise Value/EBITDA,” calculated by dividing enterprise value by estimated EBITDA;

 

   

share price as a multiple of estimated earnings for the years 2019 and 2020, or “2019E Price/Earnings” and “2020E Price/Earnings,” calculated by dividing share price by estimated earnings;

 

   

share price as a multiple of estimated cash flow per share or unit price as a multiple of estimated distributable cash flow per share or unit, as applicable, for the years 2019 and 2020, or “2019E CFPS,” “2019E DCF/Unit,” “2020E CFPS” and “2020E DCF/Unit,” respectively, calculated by dividing estimated cash flow per share or unit or estimated distributable cash flow per share or unit, as applicable, by share or unit price; and

 

   

estimated dividend (distribution) yield for the year 2019, or “2019E dividend (distribution) yield,” calculated by dividing estimated dividends (distributions) by share (unit) price.

 

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The following table sets forth the data used in the selected company analysis:

 

    Share
(Unit)
Price
    Total
Equity
Value
    Enterprise
Value
    Enterprise
Value / EBITDA
    Price /
Earnings
    Price / CFPS     Dividends
(Distributions)
Yield
 
LDC Peers                     2019E     2020E     2019E     2020E     2019E     2020E     2019E  
          (in millions)                                            

Atmos Energy Corporation

  $ 102.93     $ 12,088     $ 15,554       13.2x       11.9x       23.5x       22.1x       13.3x       11.6x       2.0

Chesapeake Utilities Corporation

    91.21       1,506       2,153       14.5x       13.5x       24.7x       23.2x       NA       NA       1.7

NiSource Inc.

    28.66       10,728       20,688       12.3x       11.6x       21.9x       20.6x       9.1x       8.7x       2.8

New Jersey Resources Corporation

    49.79       4,441       5,907       21.5x (1)      19.6x (1)      24.8x       22.9x       18.5x       15.7x       2.4

Northwest Natural Holding Co.

    65.63       1,909       2,884       12.6x       11.7x       27.8x       26.0x       11.3x       11.4x       2.9

ONE Gas, Inc.

    89.03       4,710       6,285       13.3x       12.5x       25.9x       24.7x       13.1x       12.5x       2.2

Spire Inc.

    82.29       4,535       7,186       14.2x       13.3x       22.1x       21.2x       11.7x       11.5x       2.9

Southwest Gas Holdings Inc.

    82.26       4,398       6,702       10.0x       9.2x       21.2x       19.6x       8.7x       8.2x       2.7
C-Corp
Midstream Peers
                                            Price / DCF/
Unit
       

Enbridge Inc.

  $ 36.26     $ 73,450     $ 130,452       13.3x       12.4x       19.3x       18.1x       10.0x       9.6x       6.1

Kinder Morgan, Inc.

    20.01       45,559       79,725       10.3x       9.9x       20.4x       19.1x       9.2x       8.5x       5.0

SemGroup Corporation

    14.74       1,345       3,464       7.9x       7.1x       NM       39.8x       5.0x       4.7x       12.8

Targa Resources Corp.

    41.55       9,820       16,075       11.8x       9.2x       NM       45.7x       11.7x       7.7x       8.8

Tallgrass Energy, LP

    25.14       7,122       10,828       11.1x       12.1x       13.6x       17.0x       10.2x       10.0x       8.6

The Williams Companies, Inc.

    28.72       35,772       59,390       11.8x       11.1x       30.7x       26.9x       11.1x       10.4x       5.3
UGI Propane
Distributor Peers
                                                           

AmeriGas

  $ 30.87     $ 3,272     $ 6,150       9.7x       9.6x       12.9x       12.6x       8.0x       7.8x       12.3

Ferrellgas Partners LP

    1.31       127       2,162       9.2x       8.9x       NM       NM       NM       NM       NM  

Suburban Propane Partners L.P.

    22.41       1,404       2,678       9.3x       9.2x       16.7x       15.7x       7.1x       6.8x       10.7

Superior Plus Corporation

    8.57       1,516       2,910       8.3x       7.9x       18.3x       15.0x       6.7x       6.4x       6.3
                                              Price / CFPS        

UGI (2)

  $ 55.42     $ 9,864     $ 16,394       12.3x       10.1x       21.1x       18.2x       10.3x       8.6x       2.0

UGI (3)

    —         —         —         11.2x       9.9x       22.4x       18.0x       9.0x       7.7x       2.0

 

(1)

New Jersey Resources Corporation 2019E and 2020E EBITDA multiples are excluded from summary statistics due to disproportionately high multiples resulting from investment tax credit benefits for the company’s solar assets.

(2)

Based on publicly available consensus analyst estimates.

(3)

Based on the UGI 4+8 case.

 

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The resulting low, median, less than 60% payout ratio median (in the case of the LDC Peers) and high data for the UGI Peers and corresponding data for UGI were:

 

     Enterprise Value/
EBITDA
     Price / Earnings      Price / CFPS      Dividend
(Distribution)
Yield
 
     2019E      2020E      2019E      2020E      2019E      2020E      2019E  

LDC Peers

                    

Low

     10.0x        9.2x        21.2x        19.6x        8.7x        8.2x        1.7

Median

     13.2x        11.9x        24.1x        22.5x        11.7x        11.5x        2.5

Less than 60% Payout Ratio Median

     13.7x        12.6x        23.5x        22.1x        12.5x        11.5x        2.4

High

     14.5x        13.5x        27.8x        26.0x        18.5x        15.7x        2.9

 

     Enterprise Value/
EBITDA
     Price / Earnings      Price / DCF/Unit      Dividend
(Distribution)
Yield
 
     2019E      2020E      2019E      2020E      2019E      2020E      2019E  

C-Corp Midstream Peers

                    

Low

     7.9x        7.1x        13.6x        17.0x        5.0x        4.7x        5.0

Median

     11.5x        10.5x        19.8x        23.0x        10.1x        9.0x        7.4

High

     13.3x        12.4x        30.7x        45.7x        11.7x        10.4x        12.8

 

     Enterprise Value/
EBITDA
     Price / Earnings      Price / DCF/Unit      Dividend
(Distribution)
Yield
 
     2019E      2020E      2019E      2020E      2019E      2020E      2019E  

UGI Propane Distributor Peers

                    

Low

     8.3x        7.9x        12.9x        12.6x        6.7x        6.4x        6.3

Median

     9.3x        9.1x        16.7x        15.0x        7.1x        6.8x        10.7

High

     9.7x        9.6x        18.3x        15.7x        8.0x        7.8x        12.3

 

     Enterprise Value/
EBITDA
     Price / Earnings      Price / CFPS      Dividend
(Distribution)
Yield
 
     2019E      2020E      2019E      2020E      2019E      2019E      2020E  

UGI (1)

     12.3x        10.1x        21.1x        18.2x        10.3x        8.6x        2.0

UGI (2)

     11.2x        9.9x        22.4x        18.0x        9.0x        7.7x        2.0

 

(1)

Based on publicly available consensus analyst estimates.

(2)

Based on the UGI 4+8 case.

Levered Discounted Cash Flow Analysis—Dividends—Pro Forma UGI

TPH calculated implied price per share ranges of UGI Shares pro forma for the merger by discounting estimated dividends to UGI shareholders as of March 31, 2019. TPH applied discount rates ranging from 5.00% to 6.50% (based on, among other things, TPH’s judgment of the estimated range of the cost of equity based on an analysis of UGI and the UGI Peers) to the UGI estimated dividends from April 2019 through September 2021 (as disclosed in “—Unaudited Financial Projections of UGI and AmeriGas”). TPH applied price per earnings multiples ranging from 17.0x to 23.0x (selected by TPH by reference to, among other things, the price per earnings multiples for UGI and the UGI Peers in the analysis described above under “—Selected Company Analysis —UGI”) and the same discount rate ranges to the estimated 2022 earnings per share for UGI pro forma for the merger based on the pro forma UGI 4+8 case and the pro forma UGI sensitivity 4+8 case. The analysis resulted in implied price per share ranges of UGI Shares pro forma for the merger of $55.05 to $76.11 based on the pro forma UGI 4+8 case and $48.99 to $67.62 based on the pro forma UGI sensitivity 4+8 case.

 

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Unlevered Discounted Cash Flow Analysis—Pro Forma UGI

TPH calculated implied price per share ranges of UGI Shares pro forma for the merger by discounting estimated unlevered cash flow to UGI shareholders as of March 31, 2019. TPH applied discount rates ranging from 4.50% to 6.00% (based on, among other things, TPH’s judgment of the estimated range of the cost of equity based on an analysis of UGI and the UGI Peers) to the UGI estimated unlevered cash flow from April 2019 through September 2021 (as disclosed in “—Unaudited Financial Projections of UGI and AmeriGas”). TPH applied terminal Enterprise Value to EBITDA multiples ranging from 8.5x to 11.5x (selected by TPH by reference to, among other things, the estimated enterprise value per EBITDA multiples for UGI and the UGI Peers in the analysis described above under “—Selected Company Analysis—UGI”) and the same discount rate ranges to the estimated 2022 EBITDA for UGI pro forma for the merger based on the pro forma UGI 4+8 case and the pro forma UGI sensitivity 4+8 case. The analysis resulted in implied price per share ranges of UGI Shares pro forma for the merger of $50.50 to $77.67 based on the pro forma UGI 4+8 case and $45.38 to $70.86 based on the pro forma UGI sensitivity 4+8 case.

Has/Gets Analyses—Status Quo AmeriGas and Pro Forma UGI

Levered and Unlevered Discounted Cash Flow and Discounted Distribution Analyses Model

TPH calculated implied price per share ranges of UGI Shares pro forma for the merger by discounting estimated unlevered cash flows to UGI shareholders pro forma for the merger as of March 31, 2019. TPH applied discount rates ranging from 4.50% to 6.00% (based on, among other things, TPH’s judgment of the estimated range of the cost of equity based on an analysis of UGI and the UGI Peers) to the UGI estimated unlevered cash flow from April 2019 through September 2021 (as disclosed in “—Unaudited Financial Projections of UGI and AmeriGas”). TPH applied terminal Enterprise Value to EBITDA multiples ranging from 8.5x to 11.5x (selected by TPH by reference to, among other things, the estimated enterprise value per EBITDA multiples for UGI and the UGI Peers in the analysis described above under “—Selected Company Analysis—UGI”) and the same discount rate ranges to the estimated 2022 EBITDA for UGI pro forma for the merger based on the pro forma UGI cases and the pro forma UGI sensitivity cases and adjusted the resulting implied price per share ranges by the exchange ratio provided for in the merger of 0.5000x plus $7.63 in cash consideration with respect to the Unaffiliated AmeriGas Unitholders. The analysis resulted in implied price per share ranges of UGI Shares pro forma for the merger of $32.88 to $46.46 based on the pro forma UGI 4+8 case, $32.27 to $45.66 based on the pro forma UGI historical weather case and $33.27 to $47.04 based on the pro forma UGI capital investment case. The analysis resulted in implied price per share ranges of UGI Shares pro forma for the merger of $30.32 to $43.06 based on the pro forma UGI sensitivity 4+8 case, $29.91 to $42.52 based on the pro forma UGI sensitivity historical weather case and $30.79 to $43.73 based on the pro forma UGI sensitivity capital investment case.

TPH also calculated implied price per share ranges of UGI Shares pro forma for the merger by discounting estimated dividends to UGI shareholders pro forma for the merger as of March 31, 2019. TPH applied discount rates ranging from 5.00% to 6.50% (based on, among other things, TPH’s judgment of the estimated range of the cost of equity based on an analysis of UGI and the UGI Peers) to the UGI estimated dividends from April 2019 through September 2021 (as disclosed in “—Unaudited Financial Projections of UGI and AmeriGas”). TPH applied price per earnings multiples ranging from 17.0x to 23.0x (selected by TPH by reference to, among other things, the price per earnings multiples for UGI and the UGI Peers in the analysis described above under “—Selected Company Analysis—UGI”) and the same discount rate ranges to the estimated 2022 earnings per share for UGI pro forma for the merger based on the pro forma UGI cases and the pro forma UGI sensitivity cases and adjusted the resulting implied price per share ranges by the exchange ratio provided for in the merger of 0.5000x plus $7.63 in cash consideration with respect to the Unaffiliated AmeriGas Unitholders. The analysis resulted in implied price per share ranges of UGI Shares pro forma for the merger of $35.16 to $45.68 based on the pro forma UGI 4+8 case, $34.23 to $44.39 based on the pro forma UGI historical weather case and $35.57 to $46.26 based on the pro forma UGI capital investment case. The analysis resulted in implied price per share ranges of UGI Shares pro forma for the merger of $32.13 to $41.44 based on the pro forma UGI sensitivity 4+8 case, $31.44 to $40.48 based on the pro forma UGI sensitivity historical weather case and $32.60 to $42.11 based on the pro forma UGI sensitivity capital investment case.

 

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TPH compared the implied price per share ranges of UGI Shares pro forma for the merger based upon these analyses to the implied price per unit ranges of AmeriGas common units for each of the AmeriGas operational cases, calculated by discounting estimated 2023 levered distributable cash flows and estimated 2023 distributions to AmeriGas Unitholders as of March 31, 2019 under the $3.80 distribution policy and targeted distribution policy, as described above under “—AmeriGas Financial Analysis—Discounted Distribution Analysis” and “—AmeriGas Financial Analysis—Levered Distributable Cash Flow Analysis.”

Illustrative Discounted Future Value

TPH calculated illustrative implied present values of the future value of AmeriGas common units and UGI Shares pro forma for the merger. For AmeriGas common units, TPH calculated implied per unit values at year-end 2019, 2020 and 2021 by applying terminal distribution yield multiples ranging from 8.0% to 13.0% (selected by TPH by reference to, among other things, the distribution yield multiples for AmeriGas and the AmeriGas Peers in the analysis described above under “—AmeriGas Financial Analyses—Selected Company Analysis—AmeriGas”) to the 2020, 2021 and 2022 annual distribution, respectively, then discounting to present value using an illustrative equity discount rate of 10.0% (based on the midpoint of the discount rate range as determined by, among other things, TPH’s judgment of the estimated range of the cost of equity based on an analysis of AmeriGas and the AmeriGas Peers). The annual distribution for AmeriGas common units used by TPH for each of the three years was based on each of the operational cases, under each of the targeted distribution policy and the $3.80 distribution policy. For UGI Shares pro forma for the merger, TPH calculated implied per share values as of the same dates by applying price to earnings multiples ranging from 17.0x to 23.0x (selected by TPH by reference to, among other things, the price per earnings multiples for UGI and the UGI Peers in the analysis described above under “—Selected Company Analysis—UGI”) to 2020, 2021 and 2022 earnings per share, respectively, as adjusted to reflect the use of the cash resulting from the elimination of the distribution on the AmeriGas common units in UGI pro forma for the merger to fund all-equity acquisitions at a 7.5x enterprise value/EBITDA multiple, then discounting to present value using an illustrative equity discount rate of 5.75% (based on the midpoint of the discount rate range as determined by, among other things, TPH’s judgment of the estimated range of the cost of equity based on an analysis of UGI and the UGI Peers). The annual earnings per share for UGI Shares pro forma for the merger used by TPH for 2020, 2021 and 2022 was based on the pro forma UGI cases and the pro forma UGI sensitivity cases. TPH adjusted the resulting price per share ranges by the exchange ratio provided for in the merger of 0.5000x plus $7.63 in cash consideration with respect to the Unaffiliated AmeriGas Unitholders. TPH accounted for interim distributions or dividends to AmeriGas Unitholders or UGI Shareholders, as applicable, by discounting such distributions or dividends upon receipt back to March 31, 2019.

Using the AmeriGas case, the analysis resulted in ranges of implied present values of $29.73 to $47.14 per AmeriGas common unit based on the $3.80 distribution policy and $24.11 to $38.23 per AmeriGas common unit based on the targeted distribution policy. Using the pro forma UGI 4+8 case, the analysis resulted in ranges of implied present values of $32.96 to $45.03 per UGI Share pro forma for the merger based on the $3.80 distribution policy and $33.18 to $45.66 per UGI Share pro forma for the merger based on the targeted distribution policy. Using the pro forma UGI sensitivity 4+8 case, the analysis resulted in ranges of implied present values of $29.97 to $40.86 per UGI Share pro forma for the merger based on the $3.80 distribution policy and $30.82 to $42.13 per UGI Share pro forma for the merger based on the targeted distribution policy. Based upon these analyses, TPH compared the ranges of implied present values of AmeriGas common units to the ranges of implied present values of UGI Shares pro forma for the merger at the end of each period and to the closing price for AmeriGas common units on March 29, 2019 of $30.87.

Other Analyses

Historical Exchange Ratio Analysis

Based on the closing prices per AmeriGas common unit on March 29, 2019 and for the various time periods set forth below ending on that date, TPH calculated implied historical exchange ratios by dividing the average

 

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daily closing price per AmeriGas common unit by the average daily closing price per UGI Share. This analysis indicated the following implied historical ratios (compared to the implied exchange ratio of 0.6377x provided for in the merger with respect to the Unaffiliated AmeriGas Unitholders) and premiums to the market-implied exchange ratio:

 

Date

   Implied
Exchange Ratio
     All-In Exchange
Ratio at Proposal
     Premium to
Market-Implied
Exchange Ratio
 

March 29, 2019

     0.5570x        0.6377x        14.5

30-day

     0.5274x        0.6392x        21.2

60-day

     0.5379x        0.6394x        18.9

90-day

     0.5301x        0.6386x        20.5

180-day

     0.6264x        0.6392x        2.0

360-day

     0.7715x        0.6503x        (15.7 )% 

Preliminary Presentations by TPH

In addition to its fairness opinion presentation described above, TPH also provided preliminary written presentations to the GP Audit Committee dated January 31, 2019, February 12, 2019, February 14, 2019, February 19, 2019 (referring to two presentations), February 26, 2019, February 28, 2019, March 5, 2019, March 13, 2019, March 18, 2019 (referring to two presentations) and March 29, 2019, each marked as a draft, which are referred to herein as the preliminary TPH presentations. Copies of the preliminary TPH presentations have been attached as exhibits to the transaction statement on Schedule 13E-3 filed with the SEC with respect to the merger.

The preliminary financial analyses and other information in such preliminary TPH presentations were based on information and data that was available as of the dates of the respective presentations. TPH also continued to update and refine various aspects of its financial analyses in subsequent presentations. Accordingly, the results and other information presented in such preliminary TPH presentations may differ from the TPH presentation dated April 1, 2019. The financial analyses performed by TPH in relation to its opinion dated April 1, 2019 supersede all analyses and information presented in the preliminary TPH presentations.

None of the preliminary TPH presentations, alone or together, constitute an opinion of, or recommendation by, TPH with respect to a possible transaction or otherwise, and were presented solely for discussion purposes. A summary of these other preliminary presentations is provided below. The following summary, however, does not purport to be a complete description of these preliminary presentations or of the preliminary financial analyses performed by TPH.

 

   

The January 31, 2019 presentation referenced, for informational purposes, among other things, (i) the relative unit price and share price performance of AmeriGas and UGI, respectively, during the period of January 2017 to January 2019, as compared to the performance of the Alerian MLP Index and certain peers of AmeriGas (the “comparable price performance”), (ii) the historical exchange ratio of AmeriGas common units per UGI share during the period of January 2017 to January 2019 (the “historical exchange ratio summary”), (iii) the 20 largest shareholders of AmeriGas and UGI as of January 29, 2019, (iv) a survey of precedent MLP transactions by affiliated and third party MLPs, public general partners and C-corps since 2011 (the “precedent MLP transactions survey”), and (v) selected Wall Street research analysts’ views as to AmeriGas and UGI since December 2018. The January 31, 2019 presentation also contained, among other things, a preliminary analysis of certain financial information of AmeriGas and UGI based on publicly available consensus analyst estimates and other publicly available information, including (i) an enterprise value per expected 2019 EBITDA multiple of 9.9x for AmeriGas and 10.2x for UGI, (ii) an enterprise value per expected 2020 EBITDA multiple of 9.6x for AmeriGas and 9.7x for UGI, (iii) a unit share price as a multiple of estimated distributable cash flow per unit for AmeriGas of 7.8x for 2019 and 7.6x for 2020, (iv) an expected 2019 distribution yield of 12.7% for AmeriGas, and (v) an expected 2019 dividend yield of 2.0% for UGI.

 

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The February 12, 2019 presentation updated, among other things, (i) the comparable price performance through a recent date and to include a comparison of the performance of the S&P 500 Utilities Index, (ii) the historical exchange ratio summary through a recent date and to reflect the average exchange ratio for the past two years of 0.8442x, and (iii) the precedent MLP transactions survey through a recent date. The February 12, 2019 presentation also updated the preliminary analysis of certain financial information of AmeriGas and UGI based on consensus analyst estimates and other publicly available information, which, based on a more recent date, reflected (i) an enterprise value per expected 2019 EBITDA multiple of 9.6x for AmeriGas and 12.0x for UGI, (ii) an enterprise value per expected 2020 EBITDA multiple of 9.5x for AmeriGas and 9.8x for UGI, (iii) a unit share price as a multiple of estimated distributable cash flow per unit for AmeriGas of 7.8x for 2019 and 7.7x for 2020, (iv) an expected 2019 distribution yield of 12.6% for AmeriGas, and (v) an expected 2019 dividend yield of 2.1% for UGI. The February 12, 2019 presentation also contained, among other things, a review of the then-current financial projections for AmeriGas, including the AmeriGas operational cases and with respect to the $3.80 distribution policy and the targeted distribution policy, prepared by the senior management of the General Partner, and for UGI, prepared by the senior management of UGI (the “preliminary projections”). The February 12, 2019 presentation provided, based on the preliminary projections, the following:

 

   

a preliminary selected company analysis of the AmeriGas Peers using a similar methodology as described under “—AmeriGas Financial Analyses—Selected Company Analysis—AmeriGas” as of a recent date; this preliminary selected company analysis reflected (i) a low, median and high distribution yield for the Low Growth MLP Peers of 8.5%, 11.2% and 18.3%, respectively, for 2019, (ii) a low, median and high distribution yield for the Propane Distributor Peers of 6.6%, 8.8% and 11.0%, respectively, for 2019, (iii) a low, median and high unit price for the Low Growth MLP Peers as a multiple of distributable cash flow per unit of 4.9x, 6.8x and 10.6x, respectively, for 2019 and 4.4x, 6.2x and 11.2x, respectively, for 2020, and (iv) a low, median and high unit price for the Propane Distributor Peers as a multiple of distributable cash flow per unit of 6.3x, 6.5x and 6.8x, respectively, for 2019 and 5.8x, 6.2x and 6.6x, respectively for 2020;

 

   

a preliminary selected propane transactions analysis using substantially the same selected transactions and a similar methodology as described under “—AmeriGas Financial Analyses—Selected Propane Transactions” as of a recent date; this preliminary selected propane transactions analysis reflected a low, median and high transaction value as a multiple of estimated NTM EBITDA of 3.8x, 7.5x and 12.3x, respectively;

 

   

a preliminary discounted distribution analysis using a similar methodology as described under “—AmeriGas Financial Analyses—Discounted Distribution Analysis” and applying discount rates ranging from 8.0% to 12.0% and distribution yield multiples ranging from 9.0% to 13.0%; this preliminary discounted distribution analysis reflected, (i) under the $3.80 distribution policy, an implied price per unit range of AmeriGas common units of $30.63 to $43.91 based on the AmeriGas case, $30.63 to $43.91 based on the historical weather case and $30.63 to $43.91 based on the capital investment case, and (ii) under the targeted distribution policy, an implied price per unit range of AmeriGas common units of $26.84 to $38.69 based on the AmeriGas case, $25.40 to $36.41 based on the historical weather case and $27.66 to $40.03 based on the capital investment case;

 

   

a preliminary levered distributable cash flow analysis using a similar methodology as described under “—AmeriGas Financial Analyses—Levered Distributable Cash Flow Analysis” and applying discount rates ranging from 8.0% to 12.0% and terminal DCF multiples ranging from 6.0x to 9.0x; this preliminary levered distributable cash flow analysis reflected, (i) under the $3.80 distribution policy, an implied price per unit range of AmeriGas common units of $27.03 to $38.92 based on the AmeriGas case, $24.85 to $35.66 based on the historical weather case and $27.86 to $40.38 based on the capital investment case, and (ii) under the targeted distribution policy, an implied price per unit range of AmeriGas common units of $27.78 to $40.08 based on

 

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the AmeriGas case, $25.73 to $37.02 based on the historical weather case and $28.40 to $41.24 based on the capital investment case;

 

   

a preliminary selected company analysis of UGI Peers using a similar methodology as described under “—UGI and Pro Forma UGI Financial Analyses—Selected Company Analysis—UGI” as of a recent date; this preliminary selected company analysis reflected (i) a low, median, less than 60% payout ratio median and high enterprise value as a multiple of estimated EBITDA for the LDC Peers of 9.1x, 11.9x, 12.1x and 13.8x, respectively, for 2019 and 8.4x, 11.2x, 11.2x and 12.9x, respectively, for 2020, (ii) a low, median and high enterprise value as a multiple of estimated EBITDA for the C-Corp Midstream Peers of 9.0x, 10.8x and 13.6x, respectively, for 2019 and 8.1x, 10.1x and 12.1x, respectively, for 2020, (iii) a low, median, less than 60% payout ratio median and high share price as a multiple of estimated earnings for the LDC Peers of 19.7x, 22.8x, 23.2x and 25.2x, respectively, for 2019 and 18.5x, 21.2x, 21.8x and 24.0x, respectively, for 2020, (iv) a low, median and high share price as a multiple of estimated earnings for the C-Corp Midstream Peers of 13.1x, 20.6x and 129.3x, respectively, for 2019 and 16.3x, 16.7x and 32.1x, respectively, for 2020, (v) a low, median, less than 60% payout ratio median and high share price as a multiple of estimated cash flow per share price for the LDC Peers of 7.8x, 11.2x, 10.2x and 17.1x, respectively, for 2019 and 8.1x, 10.9x, 10.7x and 14.5x, respectively, for 2020, (vi) a low, median and high share price as a multiple of estimated distributable cash flow per share price for the C-Corp Midstream Peers of 5.1x, 9.7x and 11.1x, respectively, for 2019 and 4.8x, 8.3x and 9.6x, respectively, for 2020, (vii) a low, median, less than 60% payout ratio median and high estimated dividend yield for the LDC Peers of 1.8%, 2.7%, 2.5% and 3.1%, respectively, for 2019, and (viii) a low, median and high estimated dividend yield for the C-Corp Midstream Peers of 5.5%, 7.3% and 13.1%, respectively, for 2019;

 

   

a preliminary unlevered discounted cash flow analysis using a similar methodology as described under “—UGI and Pro Forma UGI Financial Analyses—Unlevered Discounted Cash Flow Analysis—Pro Forma UGI” and applying discount rates ranging from 4.00% to 5.50% and terminal Enterprise Value to EBITDA multiples ranging from 8.5x to 12.5x for UGI and 9.0x to 12.0x for UGI pro forma for the merger; this preliminary unlevered discounted cash flow analysis reflected implied price per share ranges of $54.80 to $96.84 for UGI and $58.77 to $85.91 for UGI pro forma for the merger;

 

   

preliminary has/gets analyses using a similar methodology as described under “—Has/Gets Analyses—Status Quo AmeriGas and Pro Forma UGI—Levered and Unlevered Discounted Cash Flow and Discounted Distribution Analyses Model” and applying discount rates ranging from 4.00% to 5.50% and terminal Enterprise Value to 2022 EBITDA multiples ranging from 9.0x to 12.0x for UGI pro forma for the merger and adjusting the implied price per share ranges by an exchange ratio of 0.5757x; this preliminary has/gets analysis reflected, using the preliminary projections of AmeriGas, implied exchange ratio adjusted price per share ranges of UGI Shares pro forma for the merger of $33.41 to $46.99 based on the then-applicable pro forma UGI 4+8 case, $31.28 to $44.20 based on the then-applicable pro forma UGI historical weather case, and $34.28 to $48.24 based on the then-applicable pro forma UGI capital investment case;

 

   

a preliminary illustrative discounted future value analysis using a similar methodology as described under “—Has/Gets Analyses—Status Quo AmeriGas and Pro Forma UGI—Illustrative Discounted Future Value” and, for AmeriGas common units, applying terminal distribution yield multiples ranging from 9.0% to 13.0% and an illustrative equity discount rate of 10% and, for UGI Shares, applying terminal dividend yield multiples ranging from 1.75% to 2.75% and an illustrative equity discount rate of 5.25%; this preliminary illustrative discounted future value analysis reflected, (i) using the AmeriGas case, implied present value ranges of $30.40 to $43.03 per AmeriGas common unit based on the $3.80 distribution policy and $25.20 to $37.92 per AmeriGas common unit based on the targeted distribution policy, (ii) using the historical weather case, implied present value ranges of $30.40 to $43.03 per AmeriGas common unit based on the

 

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$3.80 distribution policy and $25.20 to $35.68 per AmeriGas common unit based on the targeted distribution policy, (iii) using the capital investment case, implied present value ranges of $30.40 to $43.03 per AmeriGas common unit based on the $3.80 distribution policy and $25.11 to $39.23 per AmeriGas common unit based on the targeted distribution policy, and (iv) an implied present value range of $43.53 to $69.63 per UGI Share.

The February 12, 2019 presentation also contained a summary of the proposed and various alternative exchange ratios, a sum-of-the-parts analysis of UGI based on the initial projections, a discounted dividend analysis of UGI Shares and UGI Shares pro forma for the merger under the $3.80 distribution policy, has/gets discounted distribution analyses for AmeriGas common units, and cost of capital analyses for AmeriGas and UGI.

 

   

The February 14, 2019 presentation included a summary of updates since the February 12, 2019 meeting of the GP Audit Committee and updated, among other things, (i) the historical exchange ratio summary to reflect the average exchange ratio for the period from December 2018 to February 2019 of 0.5191x, (ii) the precedent MLP transactions survey through a recent date, (iii) the preliminary discounted distribution analysis from the February 12, 2019 presentation by applying a distribution yield multiples range of 8.0% to 13.0%, which resulted in, under the $3.80 distribution policy, implied price per unit ranges of AmeriGas common units of $30.63 to $47.94 based on the AmeriGas case, $30.63 to $47.94 based on the historical weather case and $30.63 to $47.94 based on the capital investment case and, under the targeted distribution policy, implied price per unit ranges of AmeriGas common units of $26.84 to $42.30 based on the AmeriGas case, $25.40 to $39.75 based on the historical weather case and $27.66 to $43.81 based on the capital investment case, (iv) the preliminary levered distributable cash flow analysis from the February 12, 2019 presentation by applying a terminal DCF multiples range of 6.0x to 10.0x, which resulted in, under the $3.80 distribution policy, implied price per unit ranges of AmeriGas common units of $27.03 to $41.93 based on the AmeriGas case, $24.85 to $38.40 based on the historical weather case and $27.86 to $43.56 based on the capital investment case and, under the targeted distribution policy, implied price per unit ranges of AmeriGas common units of $27.78 to $43.20 based on the AmeriGas case, $25.73 to $39.89 based on the historical weather case and $28.40 to $44.50 based on the capital investment case, (v) the preliminary unlevered discounted cash flow analysis from the February 12, 2019 presentation by applying a terminal Enterprise Value to 2023 EBITDA multiples range of 8.5x to 11.5x and adjusting unlevered cash taxes, which resulted in implied price per share ranges of $53.66 to $85.89 for UGI, (vi) the preliminary selected propane transactions analysis using the same selected transactions described under “—AmeriGas Financial Analyses—Selected Propane Transactions,” (vii) the preliminary has/gets analyses from the February 12, 2019 presentation by applying a terminal Enterprise Value to 2022 EBITDA multiples range of 8.5x to 11.5x, which resulted in implied price per share ranges of UGI Shares pro forma for the merger of $31.04 to $44.54 based on the then-applicable pro forma UGI 4+8 case, $30.04 to $43.22 based on the then-applicable pro forma UGI historical weather case, and $31.44 to $45.13 based on the then-applicable pro forma UGI capital investment case, and (viii) a summary of the pre-tax and after-tax pro forma impact of the merger on AmeriGas and UGI. Certain other preliminary analyses presented in the February 14, 2019 presentation were substantially similar to the preliminary analyses presented in the February 12, 2019 presentation. The February 14, 2019 presentation also contained a summary of the proposed and various alternative exchange ratios, a sum-of-the-parts analysis of UGI based on the initial projections, a summary of the expected accretion percentages for UGI earnings per share and AmeriGas distributions (pre-tax) based on the then-applicable AmeriGas case, a discounted dividend analysis of UGI Shares and UGI Shares pro forma for the merger under the $3.80 distribution policy, has/gets discounted distribution analyses for AmeriGas common units and discounted dividend analyses for UGI Shares, present value of future unit price analysis for AmeriGas common units based on the then-applicable AmeriGas operational cases and cost of capital analyses for AmeriGas and UGI.

 

   

The February 19, 2019 presentation was prepared to be provided to UGI to support the GP Audit Committee’s negotiations of the terms of the potential merger and contained, among other information,

 

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an analysis of the Initial Offer and a potential counterproposal by AmeriGas, discounted distributable cash flow and distribution analyses for AmeriGas, a unitholder tax impact analysis and an after-tax distribution analysis under the Initial Offer, and a historical exchange ratio analysis.

 

   

TPH provided the GP Audit Committee with supplemental presentation materials dated February 19, 2019, which contained ranges of the present value of the future unit price of AmeriGas (applying a terminal yield range of 8.0% to 13.0%) of $29.73 to $47.14 and share price of UGI pro forma for the merger (applying a terminal price to earnings multiple of 19.0x to 23.0x) of $31.24 to $41.86 and a summary of the historical payout ratio of UGI from January 1996 through January 2018.

 

   

The February 26, 2019 presentation contained, among other information, updates to the summary of the proposed transaction and transaction analysis at various potential exchange ratios using the most recent closing share and unit prices of UGI and AmeriGas, respectively.

 

   

The February 28, 2019 presentation contained, among other information, a summary of updates since the February 14, 2019 meeting of the GP Audit Committee, including an overview of the Second UGI Offer, and selected Wall Street research analysts’ views post-investor day regarding AmeriGas distributions and updated, among other things, (i) the comparable price performance and historical exchange ratio summary through a recent date, (ii) the precedent MLP transactions survey through a recent date and for adjustments to select premiums, (iii) the preliminary selected company analyses of the AmeriGas Peers and the UGI Peers through a recent date, (iv) the preliminary selected propane transactions analysis using both LTM EBITDA and NTM EBITDA, which resulted in a low, median and high transaction value as a multiple of estimated LTM EBITDA of 3.7x, 9.6x and 11.4x, respectively, and of estimated NTM EBITDA of 3.8x, 7.5x and 12.3x, respectively, (v) the preliminary levered distributable cash flow analysis of AmeriGas common units through a recent date, (vi) the preliminary unlevered discounted cash flow analysis of UGI Shares through a recent date, (vii) the preliminary has/gets analyses through a recent date, (viii) the ranges of the present value of the future unit price of AmeriGas from the February 19, 2019 presentation, which reflected ranges of $29.73 to $47.14 based on the $3.80 distribution policy and $24.65 to $39.98 based on the targeted distribution policy, and the present value of the future share price of UGI from the February 19, 2019 presentation, which reflected ranges of $32.16 to $43.39 based on the $3.80 distribution policy and $32.38 to $43.88 based on the targeted distribution policy, and (ix) a summary of the tax pro forma impact of the merger on AmeriGas and UGI. Certain other preliminary analyses presented in the February 28, 2019 presentation were substantially similar to the preliminary analyses presented in the February 14, 2019 presentation. The February 28, 2019 presentation also contained a summary of the proposed and various alternative exchange ratios, a sum-of-the-parts analysis of UGI based on the initial projections, a summary of the expected accretion percentages for UGI earnings per share and AmeriGas distributions (pre-tax) based on the then-applicable AmeriGas case, a discounted dividend analysis of UGI Shares and UGI Shares pro forma for the merger under the $3.80 distribution policy, has/gets discounted distribution analyses for AmeriGas common units and discounted dividend analyses for UGI Shares, a present value of future unit price analysis for AmeriGas common units based on the then-applicable AmeriGas operational cases and cost of capital analyses for AmeriGas and UGI.

 

   

The March 5, 2019 presentation contained, among other information, a summary of updates since the February 28, 2019 meeting of the GP Audit Committee and updated, among other things, (i) the comparable price performance and historical exchange ratio summary through a recent date, (ii) the selected Wall Street research analysts’ views pre-investor day (November 2018) and post-investor day (December 2018 through a recent date) for additional commentary and analysts’ overviews of AmeriGas, (iii) the preliminary projections for UGI pro forma for the merger using the then-applicable AmeriGas case, (iv) the preliminary selected company analyses of the AmeriGas Peers and the UGI Peers through a recent date, (v) the preliminary levered distributable cash flow analysis of AmeriGas common units through a recent date, (vi) the preliminary unlevered discounted cash flow analysis of UGI Shares for revised calculations of certain financial forecast items, (vii) the preliminary has/gets analyses from the February 28, 2019 presentation (a) for inclusion of preliminary levered DCF “gets”

 

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analysis in lieu of preliminary discounted dividend analysis by revising the calculation of implied terminal values to use price to earnings multiples (given the static dividend policy at UGI), which resulted in implied price per share ranges of UGI Shares pro forma for the merger of $34.17 to $48.24 based on the then-applicable pro forma UGI 4+8 case, $33.17 to $46.92 based on the then-applicable pro forma UGI historical weather case, and $34.57 to $48.83 based on the then-applicable pro forma UGI capital investment case, and (b) to include implied price per share ranges of UGI Shares pro forma for the merger (applying discount rates ranging from 4.50% to 6.00% and price per 2022 estimated earnings multiples ranging from 19.0x to 23.0x), which resulted in implied price per share ranges of UGI Shares pro forma for the merger of $39.50 to $47.50 based on the then-applicable pro forma UGI 4+8 case, $38.35 to $46.05 based on the then-applicable pro forma UGI historical weather case, and $39.91 to $48.00 based on the then-applicable pro forma UGI capital investment case, (viii) the ranges of the present value of the future unit price based on the targeted distribution policy from the February 28, 2019 presentation, which reflected ranges of $36.72 to $46.79 for UGI Shares and $24.65 to $39.98 for AmeriGas common units, (ix) a summary of the tax pro forma impact of the merger on AmeriGas and UGI, and (x) the pro forma present value of the future share price analysis, revised to treat the value of cash consideration as separate from stock consideration (as opposed to converting cash consideration into additional shares at the pro forma future share price for each year). The March 5, 2019 presentation also contained a preliminary levered discounted cash flow analysis using a similar methodology as described under “—UGI and Pro Forma UGI Financial Analyses—Levered Discounted Cash Flow Analysis—Dividends—Pro Forma UGI” and applying discount rates ranging from 4.50% to 6.00% and price per 2022 earnings multiples ranging from 19.0x to 23.0x, which reflected implied price per share ranges of $65.41 to $81.39 for UGI pro forma for the merger. Certain other preliminary analyses presented in the March 5, 2019 presentation were substantially similar to the preliminary analyses presented in the February 28, 2019 presentation. The March 5, 2019 presentation also contained a summary of the challenges facing AmeriGas, a summary of proposed and various alternative exchange ratios, a sum-of-the-parts analysis of UGI based on the preliminary projections, a summary of the expected accretion percentages for UGI earnings per share and AmeriGas distributions (pre-tax) based on the then-applicable AmeriGas case, a discounted dividend analysis of UGI Shares and UGI Shares pro forma for the merger under the $3.80 distribution policy, has/gets discounted distribution analyses for AmeriGas common units and discounted dividend analyses for UGI Shares, present value of future unit price analysis for AmeriGas common units based on the then-applicable AmeriGas operational cases and cost of capital analyses for AmeriGas and UGI.

 

   

The March 13, 2019 presentation contained, among other information, a comparison of UGI share price market estimates and guidance against actual results, a review of price performance of UGI since September 2018, a summary of analyst commentary of UGI for the first quarter of 2019 and a copy of UGI’s earnings release presentation for the first quarter of 2019.

 

   

The March 18, 2019 presentation contained, among other information, a summary of updates since the March 5, 2019 meeting of the GP Audit Committee, including an overview of the Fourth UGI Offer, and updated, among other things, (i) the comparable price performance and historical exchange ratio summary through a recent date, (ii) the preliminary projections for the AmeriGas cases based on discussions with AmeriGas management and for the UGI cases to reflect lower guidance from UGI (the “revised preliminary projections”), (iii) the preliminary selected company analyses of the AmeriGas Peers and the UGI Peers through a recent date, (iv) the preliminary levered distributable cash flow analysis of AmeriGas common units for the revised preliminary projections, (v) the preliminary unlevered discounted cash flow analysis of UGI Shares from the March 5, 2019 presentation by applying a discount rate range of 4.50% to 6.00%, which resulted in implied price per share ranges of $50.47 to $77.64 for UGI pro forma for the merger based on the then-applicable pro forma UGI 4+8 case and $45.13 to $70.54 for UGI pro forma for the merger based on the then-applicable pro forma UGI sensitivity 4+8 case, (vi) the preliminary levered discounted cash flow analysis from the March 5, 2019 presentation by applying a discount rate range of 5.00% to 6.50% and a price per 2022 earnings multiples range of 17.0x to 23.0x, which resulted in implied price per share ranges of $55.54 to $76.80

 

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for UGI pro forma for the merger based on the then-applicable pro forma UGI 4+8 case and $48.82 to $67.38 for UGI pro forma for the merger based on the then-applicable pro forma UGI sensitivity 4+8 case, (vii) the preliminary has/gets analyses for the revised preliminary projections, (viii) the preliminary illustrative discounted future value analysis for the revised preliminary projections, which resulted in, (a) using the AmeriGas case, implied present value ranges of $29.73 to $47.14 per AmeriGas common unit based on the $3.80 distribution policy and $24.11 to $38.23 per AmeriGas common unit based on the targeted distribution policy, (b) using the pro forma UGI 4+8 case, implied present value ranges of $33.00 to $45.37 per UGI Share pro forma for the merger based on the $3.80 distribution policy and $33.08 to $45.47 per UGI Share pro forma for the merger based on the targeted distribution policy, and (c) using the pro forma UGI sensitivity 4+8 case, the analysis resulted in ranges of implied present values of $29.92 to $40.92 per UGI Share pro forma for the merger based on the $3.80 distribution policy and $30.00 to $41.02 per UGI Share pro forma for the merger based on the targeted distribution policy, and (ix) a summary of the tax pro forma impact of the merger on AmeriGas and UGI. Certain other preliminary analyses presented in the March 18, 2019 presentation were substantially similar to the preliminary analyses presented in the March 5, 2019 presentation. The March 18, 2019 presentation also contained a summary of the challenges facing AmeriGas, a summary of proposed and various alternative exchange ratios, a sum-of-the-parts analysis of UGI based on the revised preliminary projections, a discounted dividend analysis of UGI Shares and UGI Shares pro forma for the merger under the $3.80 distribution policy, has/gets discounted distribution analyses for AmeriGas common units and discounted dividend analyses for UGI Shares, present value of future unit price analysis for AmeriGas common units based on the then-applicable AmeriGas operational cases and cost of capital analyses for AmeriGas and UGI.

 

   

The March 18, 2019 supplemental presentation contained, among other information, updated projections of AmeriGas expected EBITDA and UGI expected earnings per share based on additional conversations with UGI senior management.

 

   

The March 29, 2019 presentation contained, among other information, a summary of updates since the March 18, 2019 meeting and updated, among other things, (i) the historical exchange ratio summary through a recent date, (ii) the revised preliminary projections to target 15% reduction of UGI management’s original earnings per share forecast on an unadjusted basis (the “further revised preliminary projections”), (iii) the preliminary selected company analyses of the AmeriGas Peers and the UGI Peers through a recent date, (iv) the preliminary levered distributable cash flow analysis of AmeriGas common units for the further revised preliminary projections, (v) the preliminary levered discounted cash flow analysis of UGI Shares for the further revised preliminary projections, (vi) the preliminary unlevered discounted cash flow analysis of UGI Shares for the further revised preliminary projections, (vii) the preliminary has/gets analyses for the further revised preliminary projections, and (viii) the preliminary illustrative discounted future value analysis for the further revised preliminary projections. The March 29, 2019 presentation also contained a summary of the challenges facing AmeriGas, a summary of the analyses at the then-applicable transaction consideration and cost of capital analyses for AmeriGas and UGI.

Each of the analyses performed in these preliminary TPH presentations was subject to further updating and subject to the final analyses provided to the GP Audit Committee dated April 1, 2019 by TPH. Each of these analyses was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to TPH as of, the dates on which TPH performed such analyses. Accordingly, the results of the financial analyses may have differed due to changes in those conditions and other information, and not all of the written and oral presentations contained all of the financial analyses listed above.

General

TPH and its affiliates, including Perella Weinberg Partners, as part of their investment banking business, are regularly engaged in performing financial analyses with respect to businesses and their securities in connection

 

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with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and other transactions as well as for estate, corporate and other purposes.

TPH and its affiliates also engage in securities trading and brokerage activities and investment management activities, as well as providing research and other financial services, and in the ordinary course of these activities, TPH and its affiliates may from time to time acquire, hold or sell, directly or indirectly, for their own accounts and for the accounts of their customers, (i) equity, debt and other securities (including derivative securities) and financial instruments (including bank loans and other obligations) of AmeriGas, UGI and any of the other companies that may be involved in the merger, including the parties to the merger agreement and any of their respective affiliates, and (ii) any currency or commodity that may be material to the parties to the merger agreement or otherwise involved in the merger and the other matters contemplated by the merger agreement.

In addition, TPH and its affiliates and certain of its and their employees, including members of the team performing services in connection with the merger, as well as certain private equity funds and investment management funds associated or affiliated with TPH in which they may have financial interests, may from time to time acquire, hold or make direct or indirect investments in or otherwise finance a wide variety of companies, including AmeriGas, UGI or their respective equityholders or affiliates, other potential participants in the merger or their respective equityholders or affiliates.

The GP Audit Committee selected TPH to act as its financial advisor in connection with its evaluation of the merger on the basis of TPH’s experience in transactions similar to the merger described in the merger agreement, its reputation in the investment community and its familiarity with AmeriGas and its business.

The description set forth above constitutes a summary of the analyses employed and factors considered by TPH in rendering its opinions to the GP Audit Committee. The preparation of a fairness opinion is a complex, analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and is not necessarily susceptible to partial analysis or summary description.

TPH acted as financial advisor to the GP Audit Committee in connection with, and has participated in certain negotiations leading to, the merger. Pursuant to the terms of its engagement, AmeriGas agreed to pay to TPH a retainer fee equal to $250,000 per quarter (with only the payment of the first installment being credited against any subsequent fees paid to TPH), payable on October 4, 2018 and thereafter, commencing on January 1, 2019, upon each quarterly anniversary thereof. Upon preparation and delivery of TPH’s opinion to the GP Audit Committee (regardless of the conclusion reached therein), TPH became entitled to receive fees of $1.0 million. TPH will be entitled to receive an additional fee of $2.0 million payable (without duplication) upon consummation of the merger and only if the merger is consummated. In addition, AmeriGas has agreed to reimburse TPH for its reasonable out-of-pocket expenses (including fees and expenses of its outside legal counsel) incurred in connection with its engagement. Such expenses are not to exceed $150,000 (other than fees and expenses incurred by TPH following an announcement where a proxy solicitation process is required in connection with the merger and in connection with reasonable travel for in-person meetings requested by the GP Audit Committee) without the prior consent of the GP Audit Committee. AmeriGas also agreed to indemnify TPH or any of its affiliates, their respective directors, officers, partners, agents or employees, or any other person controlling TPH or any of its affiliates against certain liabilities and expenses arising out of its engagement, or to contribute to payments which any of such persons might be required to make with respect to such liabilities.

TPH has previously provided various investment banking and financial services for the GP Audit Committee for which it received customary compensation. In the past two years, these services consisted of advising the GP Audit Committee with respect to its evaluation of certain strategic financings and other transactions. The aggregate fees received by TPH from AmeriGas for such services were approximately $750,000. Except as described above, during the two-year period prior to the date hereof, no material relationship

 

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existed between TPH and its affiliates and AmeriGas, UGI or any of their respective affiliates, pursuant to which compensation was received by TPH or its affiliates as a result of such a relationship. TPH and its affiliates may in the future provide investment banking or other financial services to AmeriGas or any of the other parties to the merger agreement or their respective unitholders, members or shareholders, affiliates or portfolio companies. In connection with such investment banking or other financial services, TPH may receive compensation.

J.P. Morgan Securities LLC Financial Advisor Materials

Pursuant to an engagement letter dated as of October 11, 2018 (the “J.P. Morgan engagement letter”), UGI retained J.P. Morgan as its financial advisor in connection with the proposed merger.

At the meeting of the UGI Board on April 1, 2019, J.P. Morgan rendered its oral opinion to the UGI Board that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the aggregate amount of merger consideration payable to the AmeriGas Unitholders by UGI in the merger pursuant to the terms of the merger agreement (“aggregate merger consideration”) was fair, from a financial point of view, to UGI. J.P. Morgan has confirmed its April 1, 2019 oral opinion by delivering its written opinion to the UGI Board, dated as of such date, that the aggregate merger consideration to be paid by UGI was fair, from a financial point of view, to UGI.

J.P. Morgan provided the UGI Board with the following materials (collectively, the “J.P. Morgan Materials”): (a) discussion materials prepared by J.P. Morgan and provided to the UGI Board on January 17, 2019 (the “January 17 Presentation”); (b) updated discussion materials prepared by J.P. Morgan and provided to the UGI Board on January 25, 2019 (the “January 25 Presentation”); (c) updated discussion materials prepared by J.P. Morgan and provided to the UGI Board on February 25, 2019 (the “February Presentation”); (d) updated discussion materials prepared by J.P. Morgan and provided to the UGI Board on March 4, 2019 (the “March Presentation”); and (e) presentation prepared by J.P. Morgan and provided to the UGI Board on April 1, 2019 (the “April Presentation”). The full text of the written opinion of J.P. Morgan, which sets forth the assumptions made, matters considered and limits on the review undertaken, and the J.P. Morgan Materials have been filed as exhibits to the Schedule 13E-3 and are incorporated herein by reference. The summaries of the J.P. Morgan opinion and J.P. Morgan Materials set forth in this proxy statement/prospectus are qualified in their entirety by reference to the full text of such opinion and the J.P. Morgan Materials. AmeriGas Unitholders are urged to read the opinion and the J.P. Morgan Materials carefully and in their entirety. The opinion and the J.P. Morgan Materials were intended solely to assist the UGI Board in the UGI Board’s evaluation of the merger. J.P. Morgan was not requested to provide, and J.P. Morgan did not provide, to UGI, AmeriGas, the UGI Shareholders, the AmeriGas Unitholders, the General Partner, the GP Board, the GP Audit Committee or any other person, any recommendation as to how an AmeriGas Unitholder should vote on the merger. The opinion and the J.P. Morgan Materials were prepared solely for the UGI Board and do not constitute a recommendation as to how any AmeriGas Unitholder should vote with respect to the merger or any other matter and should not be relied on as the basis for any investment decision.

In arriving at its opinion and preparing the J.P. Morgan Materials, J.P. Morgan, among other things:

 

   

reviewed the merger agreement;

 

   

reviewed certain publicly available business and financial information concerning AmeriGas and UGI and the industries in which they operate;

 

   

compared the proposed financial terms of the merger with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration paid for such companies;

 

   

compared the financial and operating performance of AmeriGas and UGI with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of AmeriGas common units and UGI Shares and certain publicly traded securities of such other companies;

 

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reviewed certain internal financial analyses and forecasts prepared by or at the direction of the management of UGI relating to AmeriGas’ and UGI’s respective businesses, as well as the estimated amount and timing of cost savings and related expenses and synergies expected to result from the merger (as used in this section, the “Synergies”); and

 

   

performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate.

In addition, J.P. Morgan held discussions with certain members of management of the General Partner and UGI with respect to certain aspects of the merger, and the past and current business operations of AmeriGas and UGI, the financial condition and future prospects and operations of AmeriGas and UGI, the effect of the merger on the financial condition and future prospects of UGI, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.

In giving its opinion and preparing the J.P. Morgan Materials, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by AmeriGas, the General Partner and UGI or otherwise reviewed by or for J.P. Morgan, and J.P. Morgan did not independently verify (and did not assume responsibility or liability for independently verifying) any such information or its accuracy or completeness and, pursuant to the J.P. Morgan engagement letter, did not assume any obligation to undertake any such independent verification. No representation or warranty, express or implied, was made by J.P. Morgan in relation to the accuracy or completeness of the information presented in the J.P. Morgan Materials or its suitability for any particular purpose. J.P. Morgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities of UGI, AmeriGas, the General Partner or Holdings, or any other company or business, nor did J.P. Morgan evaluate the solvency of UGI, AmeriGas, the General Partner or Holdings, or any other company or business under any applicable laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom including the Synergies, J.P. Morgan assumed, at UGI’s direction and approval, that such analyses and forecasts were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of AmeriGas and UGI to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts (including the Synergies) or the assumptions on which they were based. J.P. Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors to UGI with respect to such issues. J.P. Morgan assumed that the merger and the other transactions contemplated by the merger agreement will have the tax consequences described in discussions with, and materials furnished to J.P. Morgan by, representatives of UGI, and will be consummated as described in the merger agreement, except that J.P. Morgan has assumed that record dates for determining the AmeriGas Unitholders entitled to receive quarterly cash distributions from AmeriGas occurring after the date of the opinion will be consistent with the historical practice of AmeriGas notwithstanding the provisions of Section 6.11 of the merger agreement. J.P. Morgan also assumed that the representations and warranties made by UGI, AmeriGas, the General Partner and Holdings in the merger agreement and the related agreements are and will be true and correct in all respects material to J.P. Morgan’s analysis. J.P. Morgan has further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on AmeriGas, the General Partner, Holdings or UGI or on the contemplated benefits of the merger.

The matters considered by J.P. Morgan in its analyses and reflected in the opinion and the J.P. Morgan Materials were necessarily based on economic, market, industry, operating and other conditions as in effect on, and the information made available to J.P. Morgan as of, the respective dates of such opinion or materials. Many such conditions are beyond the control of UGI, AmeriGas, the General Partner, Holdings and J.P. Morgan. Accordingly, these analyses are inherently subject to uncertainty, and none of UGI, AmeriGas, the General Partner, Holdings, J.P. Morgan or any other person assumes responsibility if future results are different from those forecasted. J.P. Morgan’s opinion noted that subsequent developments may affect such opinion and J.P. Morgan does not have any obligation to update, revise, or reaffirm the contents of the J.P. Morgan Materials or

 

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opinion. J.P. Morgan’s opinion is limited to the fairness, from a financial point of view, to UGI of the aggregate merger consideration to be paid by UGI in the proposed merger and J.P. Morgan expresses no opinion as to the fairness of the aggregate merger consideration to the holders of any class of securities, creditors or other constituencies of UGI or as to the underlying decision by UGI to engage in the merger. Furthermore, J.P. Morgan expresses no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the merger, or any class of such persons relative to the aggregate merger consideration to be paid by UGI in the merger or with respect to the fairness of any such compensation. J.P. Morgan expressed no opinion as to the price at which the UGI Shares or the AmeriGas common units will trade at any future time.

The terms of the merger agreement, including the aggregate merger consideration, were determined through arm’s length negotiations between UGI and AmeriGas, and the decision to enter into the merger agreement was solely that of the UGI Board, GP Audit Committee and GP Board. J.P. Morgan’s opinion and financial analyses were only one of the many factors considered by the UGI Board in its evaluation of the proposed merger and should not be viewed as determinative of the views of the UGI Board or management with respect to the proposed merger or the consideration.

J.P. Morgan Materials

January 17 Presentation

The January 17 Presentation contained an overview of the general benefits and considerations of the merger as contemplated and a general description of certain alternative transactions which UGI had previously considered. The January 17 Presentation also contained information regarding trends in similar MLP buy-in transactions and a comparison of UGI’s and AmeriGas’ price performance relative to their respective peers based on street estimates as of January 9, 2019. The January 17 Presentation also included an illustrative merger timeline and an overview of recent precedent affiliate MLP buy-in transactions.

In addition, the January 17 Presentation contained a two-year exchange ratio analysis between AmeriGas and UGI, certain financial analyses with respect to the effects of the merger, including a comparison of selected pro forma financial data for UGI before and after giving effect to the merger, and a financial comparison of various premiums and consideration mixes. The January 17 Presentation also described UGI’s relative earning mix on both a standalone basis and on a pro forma basis post-merger based on UGI management’s projections through 2021. The January 17 Presentation also contained an illustrative AmeriGas analysis at various purchase prices and an illustrative cash flow impact of the merger to AmeriGas, each based on equity research consensus projections as of January 9, 2019 and public filings, as well as illustrative financial impacts of the merger to UGI.

January 25 Presentation

The January 25 Presentation contained analyses that were substantially similar to those contained in the January 17 Presentation and updated the prior analyses based on then-current information.

February Presentation

The February Presentation included updated information reflecting the AmeriGas Counteroffer from the GP Audit Committee and assumptions pertaining to the illustrative AmeriGas analysis at various purchase prices, unlevered internal rate of return calculations, the illustrative financial impacts of the merger to UGI, a financial comparison of various premiums and general summary conclusions.

March Presentation

Similar to the February Presentation, the March Presentation included updated information reflecting the Second AmeriGas Counteroffer and assumptions pertaining to the illustrative AmeriGas analysis at various purchase prices, unlevered internal rate of return calculations, the illustrative financial impacts of the merger to UGI, the financial comparison of various premiums and general summary conclusions.

 

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April Presentation

In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methodologies in rendering its opinion to the UGI Board on April 1, 2019 and in the April Presentation delivered to the UGI Board on such date in connection with the rendering of such opinion. The following is a summary of certain material financial analyses contained in the opinion and the April Presentation. The following summary, however, does not purport to be a complete description of the analyses or data presented by J.P. Morgan. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by J.P. Morgan, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgan’s analyses.

AmeriGas Public Trading Multiples Analysis

Using publicly available information, J.P. Morgan compared selected financial data of AmeriGas with similar data for selected publicly traded propane and fuel distribution companies engaged in businesses which J.P. Morgan judged to be sufficiently similar in function and geography to AmeriGas.

The companies selected by J.P. Morgan for purposes of its analysis (collectively, the “AmeriGas Selected Companies”) were Superior Plus Corp. (“Superior Plus”), Suburban Propane Partners, L.P. (“Suburban”), Parkland Fuel Corporation (“Parkland”), Global Partners LP (“Global”) and Sprague Resources LP (“Sprague”). The AmeriGas Selected Companies were chosen because they are publicly traded companies with operations and businesses that, for the purpose of J.P. Morgan’s analysis, may be considered sufficiently similar to those of AmeriGas. The AmeriGas Selected Companies may be considered similar to AmeriGas based on the nature of their assets and operations; however, none of the companies selected is identical or directly comparable to AmeriGas, and certain of these companies may have characteristics that are materially different from those of AmeriGas. The analysis necessarily involves complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies differently than they would affect AmeriGas.

For each company listed above, J.P. Morgan calculated and compared various financial multiples and ratios based on publicly available information as of March 29, 2019. For each of the following analyses performed by J.P. Morgan, estimated financial data for the AmeriGas Selected Companies were based on (except as otherwise noted) information obtained from FactSet Research Systems (“street estimates”) as of March 29, 2019 and each was based on a fiscal year ending on September 30. The information J.P. Morgan calculated for each of the AmeriGas Selected Companies included:

 

   

Multiple of firm value (calculated as the market value of the company’s fully diluted common equity plus implied general partnership value, debt and minority interest, less cash and cash equivalents) to estimated EBITDA (calculated as earnings before interest, taxes, depreciation and amortization), in each case, for the years ending September 30, 2019 and 2020;

 

   

Multiple of price (using the share or unit price as of March 29, 2019) to estimated DCF per common share or unit (calculated by running total DCF through the company’s distribution waterfall), in each case, for the years ending September 30, 2019 and 2020; and

 

   

The estimated calendar year 2019 and 2020 distribution yields, calculated as the estimated distribution per share or limited partner unit divided by the share or common unit price as of March 29, 2019.

 

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Results of the analysis with respect to the AmeriGas Selected Companies are as follows:

AmeriGas Selected Companies

 

     Firm Value /
EBITDA
     Share or Unit
Price / DCF Per
Common Share
or Unit
     Distribution
Yield
 
     2019E      2020E      2019E      2020E      2019E     2020E  

Superior Plus

     8.2x        7.5x        7.5x        6.7x        6.3     6.3

Suburban

     9.5x        9.4x        6.8x        6.5x        10.7     10.7

Parkland

     9.8x        9.1x        12.4x        11.1x        2.9     2.9

Global

     6.8x        7.4x        7.7x        8.0x        10.1     10.2

Sprague

     7.8x        7.0x        7.0x        6.5x        14.4     14.4

J.P. Morgan also calculated the same financial multiples and ratios for AmeriGas using AmeriGas’ market price as of March 29, 2019, based on projections as provided and approved by UGI management (included for reference only and referred to as “management projections” in the below table) and street estimates (referred to as “consensus” in the below table).

 

     Firm Value /
EBITDA
     Unit Price /
DCF Per
Common Unit
     Distribution
Yield
 
     2019E      2020E      2019E      2020E      2019E     2020E  

Management projections

     10.2x        9.8x        8.5x        8.2x        10.2     10.8

Consensus

     9.9x        9.7x        8.1x        8.0x        10.4     9.8

J.P. Morgan did not rely solely on the quantitative results of the AmeriGas Selected Companies analysis, but also made qualitative judgments concerning differences between the business, financial and operating characteristics and prospects of AmeriGas and the AmeriGas Selected Companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis. These qualitative judgments related primarily to the differing sizes, geography, corporate structure, growth prospects, asset profiles and capital structures between AmeriGas and the AmeriGas Selected Companies. Based upon these judgments, J.P. Morgan selected multiple reference ranges for the AmeriGas Public Trading Multiples of 7.00x-10.00x and 7.00x-9.75x for firm value to estimated 2019 and 2020 EBITDA, respectively, 7.00x-8.25x and 6.50x-8.00x for price to estimated 2019 and 2020 DCF per common unit, respectively and ranges of 11.00%-10.00% and 11.00%-10.00% for estimated 2019 and 2020 distribution yields, respectively.

After applying such ranges to the appropriate metrics for AmeriGas, the analysis indicated the following implied equity value per unit ranges for AmeriGas common units (resulting per-unit values were in all cases rounded to the nearest $0.25 per unit):

Trading Multiples Implied Equity Value Per Common Unit Range

 

     Firm Value /
EBITDA
     Unit Price / DCF
Per Common Unit
     Distribution Yield  
     2019E      2020E      2019E      2020E      2019E      2020E  

Low

   $ 9.75      $ 11.50      $ 25.50      $ 24.50      $ 28.75      $ 30.25  

High

   $ 29.25      $ 30.25      $ 30.00      $ 30.25      $ 31.50      $ 33.25  

UGI Public Trading Multiples Analysis

Using publicly available information, J.P. Morgan compared selected financial data of UGI with similar data for selected publicly traded diversified utility companies engaged in businesses that J.P. Morgan judged to be sufficiently analogous to UGI.

 

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The companies selected by J.P. Morgan for purposes of its analysis (collectively, the “UGI Selected Companies”) were CenterPoint Energy, Inc. (“CenterPoint”) and National Fuel Gas Company (“National Fuel”). The UGI Selected Companies may be considered similar to UGI based on the nature of their assets and operations; however, none of the companies selected is identical or directly comparable to UGI, and certain of these companies may have characteristics that are materially different from those of UGI. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies differently than they would affect UGI.

For each company listed above, J.P. Morgan calculated and compared various financial multiples and ratios based on publicly available information as of March 29, 2019. For each of the following analyses performed by J.P. Morgan, estimated financial data for the UGI Selected Companies were based on (except as otherwise noted) information obtained from street estimates as of March 29, 2019 and a fiscal year ending on September 30. The information J.P. Morgan calculated for each of the UGI Selected Companies included: