Parkland Fuel To Acquire Chevron Canada R&M From Chevron Canada For US$1.24 Billion

Published: Apr 18 2017
Deal Summary

Parkland Fuel Corporation, a marketer of fuel and petroleum products, entered into an agreement to acquire Chevron Canada R&M ULC, a company that operates Canadian integrated downstream fuel business, from Chevron Canada Limited, a company engaged in finding, producing, refining, and marketing crude oil and natural gas, for a purchase consideration of approximately C$1,646 million (MM) (US$1,237.53 MM), including an estimated working capital of C$186 MM (US$139.84 MM).

Under the terms, Parkland Fuel will finance the consideration through C$660 MM (US$496.21 MM) bought deal private placement of shares; C$268 MM (US$201.49MM) drawn on revolving credit facility; C$500 MM (US$375.92 MM) from a bridge facility; and C$40 MM (US$30.07 MM) from non-debt sources.

The downstream fuel business consists of 129 Chevron-branded retail service stations principally located in Metro Vancouver; 37 commercial cardlock sites in British Columbia and Alberta; three marine fueling stations located in Vancouver; a 55,000 bd of complimentary refinery in Burnaby; three terminals located in Burnaby, Hatch Point, and Port Hardy, British Columbia; and a wholesale business which includes aviation fuel sales to the Vancouver International Airport.

Merrill Lynch, Pierce, Fenner & Smith Incorporated; TD Securities Inc.; and National Bank Financial Inc. are acting as financial advisors, while McCarthy Tetrault LLP and Bennett Jones LLP are acting as legal advisors to Parkland Fuel in the transaction.

The transaction will enable Parkland Fuel to strengthen its supply-focused business model and will add significant scale with Chevron retail brand and network in British Columbia.

The transaction is expected to be completed in fourth quarter 2017, subject to the receipt of customary third-party consents and regulatory approvals, including approval from the Competition Bureau of Canada.

Bob Espey, president and CEO of Parkland Fuel, said, "This accretive acquisition further strengthens our supply-focused business model and adds significant scale with the premier Chevron retail brand and network in British Columbia. Parkland is acquiring a highly integrated business which adds significant supply infrastructure and logistics capability to support Parkland's existing operations. The refinery in Burnaby is an important asset to Metro Vancouver and British Columbia and we will continue to operate it with the capable and experienced professionals who manage the refinery today. We look forward to welcoming the Chevron team to our company, and to deepening our relationships in British Columbia."

Mike McMillan, CFO of Parkland Fuel, said, "The scale of the pro-forma business combined with the strong cash flow from operations and operational synergies expected from the Acquired Business will further strengthen Parkland's balance sheet and capital structure. The transaction financing structure we have put in place enables Parkland's pro forma leverage ratio to be approximately 3.5x and is expected to be reduced further in 2019."

The transaction implies a value of US$8,509,224.81 per fuel station.

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