Parkland Fuel Corporation (TSX: PKI) has entered into an agreement to acquire all of the shares of Chevron Canada R&M ULC from Chevron Canada Limited for $1,460 million, plus an estimated $186 million in working capital adjustment.
The acquisition is expected to close in Q4 2017.
Chevron Canada R&M operates Chevron’s Canadian integrated downstream fuel business. The acquired business consists of: 1) 129 Chevron-branded retail service stations principally located in Metro Vancouver, which complement Parkland’s existing 44 Chevron-branded sites in British Columbia, 2) 37 commercial cardlock and three marine fueling locations, 3) a complimentary refinery in Burnaby, 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.
“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,” said Bob Espey, President & CEO of Parkland. “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.”
Parkland Fuel intends to finance the acquisition with a fully underwritten financing package including: 1) approximately $660 million from a bought deal private placement of common shares co-led by TD Securities Inc. and National Bank Financial Inc.; 2) $268 million drawn on revolving credit facility and $500 million from a bridge facility, both of which have been fully underwritten by The Toronto-Dominion Bank and National Bank of Canada as co-lead arrangers and joint bookrunners; and 3) $40 million of non-debt sources, the majority of which is expected to be cash flows from operations.
Parkland expects to replace the bridge facility with alternative longer term debt prior to the closing of the acquisition. Furthermore, Parkland intends to enter into a working capital financing agreement with Merrill Lynch Commodities to finance the hydrocarbon inventory and receivables, which are estimated to be $258 million at the close of the acquisition.
BofA Merrill Lynch, TD Securities Inc. and National Bank Financial Inc. are serving as financial advisors to Parkland. McCarthy Tétrault LLP is serving as Parkland’s legal advisor for the acquisition and Bennett Jones LLP is serving as Parkland’s legal advisor in respect of the offering and competition matters relating to the acquisition.
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