Mr. David LeMay reports

STUART OLSON ANNOUNCES AGREEMENT TO ACQUIRE STUDON ELECTRIC & CONTROLS INC.

Stuart Olson Inc. signed today a definitive agreement to acquire all of the issued and outstanding common shares of Studon Electric & Controls Inc. Headquartered in Red Deer, Alta., Studon is a leading electrical and instrumentation services provider offering construction, maintenance and turnaround services to the oil and gas, pipeline, and petrochemical industries in Western Canada. The company employs between 500 and 1,000 highly skilled electricians and instrumentation trades people at any given time. For the 12-month period ending Nov. 30, 2014, Studon is expected to generate revenue of approximately $151.5-million and normalized earnings before interest, taxes, depreciation and amortization of approximately $16.7-million.

The purchase price of approximately $76.2-million, which is based on Studon's trailing 12-month EBITDA as at Nov. 30, 2014, and subject to adjustment, consists of an equity purchase price of $65.7-million plus the assumption of net debt and a working capital adjustment. Ten per cent of the purchase price will be payable through the issuance of approximately 1.1 million common shares of Stuart Olson at a deemed price of $7.05 per share. The purchase price may be increased by a maximum of $25.8-million through earn-out payments over the next three years. The earn-out payments are based on Studon's annual EBITDA exceeding a threshold of approximately $16.0-million, with the threshold being increased if Studon's prior-year EBITDA is below $16.0-million.

The board of directors of Stuart Olson has unanimously approved the transaction.

David LeMay, president and chief executive officer of Stuart Olson, said: "The acquisition of Studon is a critical step in our strategy to become an integrated, full-service construction company. In particular, it strengthens the vertical integration of our industrial group and supports our objective of growing this group into a self-performing general contractor. Studon's strong management team and complementary service offering will help us to continue executing on this strategy going forward. The strategic and cultural fit is excellent."

Don Sutherland, chief executive officer and co-founder of Studon, said, "We are excited to be joining Stuart Olson, a company that has the platform and capabilities to help grow our business and capitalize on the opportunities ahead."

The transaction is expected to close no later than Jan. 25, 2015, subject to Competition Bureau and Toronto Stock Exchange approval. Following the transaction, Studon's results will be reported as part of Stuart Olson's industrial group.

Studon's management team will continue to lead the day-to-day operations of the business and will continue to contribute to the development and execution of Studon's business plans.

Transaction highlights

The transaction is consistent with Stuart Olson's publicly disclosed expansion strategy and provides a platform for future growth of the industrial group. Studon's operations are concentrated in the attractive oil sands and SAGD markets and present opportunities to cross-sell and bundle services with Stuart Olson's existing clients. Other future growth opportunities for the business include:

• Continued investment in the oil sands, particularly in the in situ subsector;
• Continued build-out of pipeline systems in Western Canada needed to reduce capacity constraints;
• Conversion of new construction projects into long-term maintenance contracts.

The transaction also provides an opportunity to efficiently redeploy cash proceeds from the sale of Broda into an area of focus.

The transaction is expected to be immediately accretive to both earnings per share and free cash flow per share before synergies.

Transaction financing

The equity purchase price consists of approximately $58.1-million in cash and $7.6-million in common shares. The cash consideration will be financed by a combination of cash on hand and a draw on Stuart Olson's existing credit facility. The share consideration will consist of approximately 1.1 million common shares, calculated using the 20-day volume-weighted average trading price of the common shares as at Nov. 25, 2014. The share consideration is subject to a lock-up period of up to 720 days. One-third of the common shares issued will be released from lock-up every 240 days. Management expects to maintain a moderate leverage profile that is well within bank covenants and consistent with Stuart Olson's stated targets. At close, management expects senior debt to LTM earnings before interest, taxes, depreciation and amortization to be less than 1.0 times and net debt (including convertible debentures) to LTM EBITDA to be approximately 2.8 times.

Stuart Olson's advisers

TD Securities Inc. acted as exclusive financial adviser to Stuart Olson in connection with the transaction. Stuart Olson's legal adviser on the transaction was Norton Rose Fulbright Canada LLP, and its accounting and tax adviser was PricewaterhouseCoopers LLP.

Conference call

Stuart Olson will hold a conference call and webcast to discuss the transaction on Nov. 27, 2014, at 7 a.m. Mountain Time (9 a.m. Eastern Time). The webcast will be broadcast live and will also be available for replay in the presentations and events subsection of the company's website under investor relations at the company's website. Financial analysts and institutional investors who wish to ask questions during the conference call are invited to call 1-888-390-0546 (Canada and the United States) or 1-587-880-2171 (outside Canada and the United States). For those unable to participate on the live call, a replay will be available until Dec. 18, 2014, by dialling 1-888-390-0541 (Canada and the United States) or 1-416-764-8677 (outside Canada and the United States), PIN 127700. The public is invited to listen to the live conference call or the replay.

We seek Safe Harbor.