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Enter Symbol
or Name
USA
CA



Parkland Fuel Corp
Symbol PKI
Shares Issued 75,014,657
Close 2014-09-17 C$ 20.00
Market Cap C$ 1,500,293,140
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Parkland to buy Pioneer's gas stations for $378-million

2014-09-17 17:19 ET - News Release

Mr. Bob Espey reports

PARKLAND FUEL CORPORATION ENTERS AGREEMENT TO ACQUIRE PIONEER ENERGY, CANADA'S LARGEST PRIVATE INDEPENDENT FUEL MARKETER

Parkland Fuel Corp. has entered into a definitive agreement to acquire the assets of Pioneer Energy.

Subject to the satisfaction of closing conditions and closing adjustments, the assets of Pioneer will be purchased for $378-million, including $259-million in cash, $119-million in common shares of Parkland and the assumption of standard operating liabilities. At 6.9 times Pioneer's trailing 12-month EBITDA (earnings before interest, taxes, depreciation and amortization) of approximately $55-million, this acquisition is both accretive and attractively priced for a premier retail fuel network.

Pioneer's current joint owners, The Pioneer Group Inc. and Suncor Energy Inc., will receive consideration as follows:

  • The Pioneer Group Inc. will receive $76-million or 39 per cent of its total consideration in cash and $119-million or 61 per cent of its total consideration in common shares of Parkland. One-third of the common shares held by The Pioneer Group Inc. will be subject to a one-year minimum holding period, and the remaining two-thirds are subject to a two-year minimum holding period;
  • Suncor Energy Inc. will receive $183-million in cash.

Parkland remains poised for further growth with a strong balance sheet. Parkland's existing credit facility can be utilized to finance the cash consideration of the acquisition.

"We have long recognized the Ontario retail marketplace as a critical growth opportunity for Parkland, aligning with Parkland's overarching supply strategy. We also recognize Pioneer Energy as one of Canada's most respected independent retail fuel marketers, having built Pioneer into the strongest independent retail fuel brand in Ontario. Given the Pioneer Group's sophisticated understanding of the retail fuel industry, its investment in Parkland is a strong endorsement of our strategy, and we look forward to welcoming its team," said Bob Espey, president and chief executive officer of Parkland. "Our five-year growth plan has progressed rapidly as a result of our team's ability to identify and execute disciplined transactions. We continue to anticipate additional accretive acquisitions, adhering to our disciplined approach to growth."

Including the acquisition, since 2011 Parkland has successfully added six billion litres in petroleum volume, $115-million in annualized EBITDA through acquisitions and their associated synergies, and $11-million from the "give me five!" initiative. With the acquisition, Parkland is expected to attain its goal to add $125-million in additional adjusted EBITDA by 2015, a full year earlier than expected.

Acquisition highlights

Grow:

  • Adds 319 gas stations in Ontario and 74 gas stations in Manitoba, increasing Parkland's national footprint to more than 1,000 gas stations, or roughly 9 per cent of the Canadian retail fuel market;
  • Includes 148 Pioneer-branded and 228 Esso-branded gas stations, many of which are in prime urban locations;
  • Increases distributable cash flow by 26 cents per share annually;
  • Achieves annual adjusted EBITDA of $250-million by 2015.

Supply:

  • Adds scale and diversity to Parkland's Central Canadian supply portfolio;
  • Generates material supply synergies.

Operate:

  • Integration of Pioneer operations is expected to occur over the course of 24 months;
  • Pioneer's network of 393 gas stations includes 152 company and 241 independent dealer stations;
  • Pioneer's commercial fuel business is similar to Parkland.

Founded in 1956 by the late Murray Hogarth, Pioneer has built a premier network of gas stations throughout Ontario and Manitoba, operating primarily under the Pioneer and Esso brands. Today, Pioneer distributes more than two billion litres of fuel annually through 393 gas stations, and a recently acquired commercial operation in Ontario, New Brunswick and Nova Scotia. Pioneer currently distributes 5.1 per cent of total retail fuel volumes across Canada, and has a 12-per-cent share of the Ontario and Manitoba retail gas markets.

Pioneer founder, Mr. Hogarth, commented before his recent passing, "It is extremely gratifying to me that the Pioneer team and brand will continue driving forward with Parkland along with our successful legacy that began in 1956."

"I want to thank everyone in the Pioneer family for their tremendous work and dedication over the years in making Pioneer a great success, and one of Canada's most respected independent fuel marketers," said Tim Hogarth, chief executive officer and executive chairman of Pioneer. "The Pioneer Group chose to invest the majority of its proceeds in Parkland because of our long-term industry commitment and belief in Parkland's ability to continue its aggressive growth path."

Mr. Hogarth is expected to be appointed to Parkland's board of directors, conditional upon completion of the acquisition.

The acquisition is subject to the receipt of customary third party consents and regulatory approvals, including approvals from the Toronto Stock Exchange and the Competition Bureau.

Adjusted EBITDA guidance for 2014-15 revised

While the acquisition of Pioneer is expected to boost Parkland's 2015 adjusted EBITDA expectations to $250-million, it is not expected to close before the end of 2014. Parkland's expected case forecast for 2014 of $200-million in adjusted EBITDA included $12-million in acquisitions. As timing for the completion of the acquisition is expected to be later than originally anticipated, Parkland's expected case for 2014 has been reduced by $12-million (acquired EBITDA assumption) to $188-million, and the low and high cases have also been adjusted down by the corresponding assumption for acquired EBITDA ($7-million and $15-million, respectively).

                         ADJUSTED EBITDA FORECAST
                         (in millions of dollars)                         

                                                              2014      2015

Expected case                                                  188       250
Low case                                                       178       235
High case                                                      194       265

Investor event and conference call information

Parkland Fuel will host an investor event and webcast at 9:30 a.m. Mountain Time (11:30 a.m. Eastern Time) on Sept. 18, 2014, to discuss the acquisition of Pioneer Energy and Parkland's guidance.

Mr. Espey, vice-president of strategy and corporate development, Irfhan Rawji, and vice-president of retail operations, Peter Kilty, will be available to take questions from securities analysts, brokers and investors following their formal comments.

Please log into the webcast slide presentation 10 minutes before the start time.

To access the conference call by telephone from within Canada, dial toll-free 1-800-952-4972. International callers or callers from the Toronto area should use 416-340-9432. Please connect approximately 10 minutes prior to the beginning of the call.

The webcast will be available for replay within 24 hours of the end of the conference call.

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