Energy Company Is Committed to Long-Term Company Success and Rewarding Employees in Establishing ESOP

Overview

Rhoads Energy began in Quarryville, Pennsylvania, in 1917 when Jerome H. Rhoads began selling kerosene from the back of a rail car. Over 100 years later, Rhoads Energy continues to stay true to Mr. Rhoads’ legacy – where its employees and customers are the foundation of the locally owned and family-operated business. Today, Rhoads Energy has grown to become a family of companies that offers a variety of products and services to meet the needs of its customers as a full-service energy provider, including heating oil, natural gas, propane, equipment installation and commercial fueling. The company endeavors to build lifetime relationships with customers by focusing on high-quality service at every level.

Rhoads Energy is committed to long-term growth and profitability through the distribution, service and marketing of its energy products. The company strives to be a major provider to energy consumers in its trading market through an ongoing commitment to customer satisfaction, dedicated employees and advanced technology. Rhoads Energy’s 165 employees can expect to be treated with fairness, gratitude, honesty, integrity and respect.

Situation

Rhoads Energy had achieved significant growth, and they understood the importance of continuing to move forward with planning for the future of the company. However, ownership had key goals that were integral to the plan, including rewarding employees, a liquidity event for the owners, tax efficiency and management succession over the long-term. They had been in contact with SES ESOP Strategies for several years, and they were ready to develop a plan of action for the company’s future.

Solution

Based on the company’s business plan and strategic goals, it was determined that the best solution for Rhoads Energy was a minority transaction. This allowed the owner to achieve the objective of liquidity funded by third-party debt, while still maintaining ownership of the company. Once the decision was made, SES got to work assisting the company with financial modeling and structuring, selecting a transaction team, negotiating a new senior debt facility and negotiating with the trustee team. Rhoads Energy was already an S Corporation, and the company will remain an S Corporation after the completion of the transaction. Since the company will be an S Corporation partially owned by an ESOP, it will effectively be exempt from corporate income taxes to the extent of the ESOP ownership, and ESOP’s share of tax distributions previously used to pay federal and state income taxes can now be utilized to pay off senior debt or for other business purposes. The tax efficiency of the company moving forward will also assist Rhoads Energy in successfully maintaining its other business plan objectives (including growth through acquisitions, sustainability and rewarding employees) after becoming a minority ESOP.

“With a successful past and present, Rhoads Energy’s owners also want a successful future for the company and employees, and we firmly believe becoming an ESOP is integral to that success,” said Michael DeBerdine III, CEO of Rhoads Energy. “From the very beginning, the team at SES ESOP Strategies has been committed to helping us ensure we continue to achieve that success.”

For more information about this ESOP transaction, please contact SES President and CEO Ed Renenger at 610.478.2238 or Mark Russell at 817.566.1013.