Heartland Inc. said it has acquired Middlesboro, Ky.-based Lee Oil Company – including Lee Food Marts and Lee Enterprises – for cash, stock and promissory notes in exchange for 100% of the stock in these businesses.

Heartland has now become a company that will have sales in excess of $130 million and a corresponding EBIDTA of approximately $4.25 million.

Lee Oil Company has been a multi-state petroleum marketer and distributor with approximately 36 million gallons of petroleum product sales last year. Further, Lee has more than 35 long-term petroleum supply contracts with retail and wholesale customers.

In c-store retailing, Lee Food Mart operates 23 convenience stores in Virginia, Tennessee and Kentucky, though it also has additional sales in home heating oil, bulk oil lubes and oil burners to make Lee Oil Company a fully diversified petroleum distributor in its markets.

The acquisition included a payment to the former owners of the Lee companies – including Terry Lee, CEO and a director of Heartland – amounting to an aggregate of $3.25 million in cash, promissory notes in the amount of $3.25 million and 2.5 million shares of common stock in Heartland Inc.

To fund the acquisition, Heartland entered into a loan agreement with Choice Financial Group of North Dakota. The note with Choice Financial Group has a 7.75% interest rate and amortizes on a monthly basis. It is required to be paid in full by Sept. 30, 2011.

“We are happy to have this acquisition completed,” said Thomas Miller, secretary of Heartland Inc. “Lee Oil Company is considered the first step in a planned expansion into the oil distribution industry. We have commenced the review of other opportunities in this area and management believes prospects for regional growth due to economies of scale using Lee Oil management expertise are promising.”