RED DEER, Alberta -- Parkland Fuel Corp. earlier this month announced that it entered into a binding agreement to acquire the business of Cango Inc. as of May 31. Cango, a major independent retail fuel marketer in Ontario, supplies petroleum products to a network of 155 independent dealers and company-operated retail gasoline outlets in Ontario under the Cango, Sunys, Gas Rite and Esso brands. And Parkland is reportedly eyeing the 260 stations that Shell Canada Ltd. has put on the market.
Cango supplies 400 million liters (105.7 million U.S. gallons) to this network, which [image-nocss] currently includes 29 retailers and 126 dealers, of which 80 are Esso branded through Cango's retail branded distributor agreement with Imperial Oil.
Parkland has also agreed to acquire, subject to certain conditions to be met upon closing, seven retail fuel outlets representing 25 million liters (6.6 million U.S. gallons) from Overwaitea Food Group, which operates Save On Foods Gas Bars in Western Canada. The seven outlets, located in British Columbia and Alberta, will be rebranded to Fas Gas Plus, and Parkland expects them to be in operation in time for the summer driving season.
The binding agreement between Parkland and Cango is subject to the approval of the Competition Bureau and other closing conditions. The final price of the acquisition will be released at the time of close.
Parkland Fuel is mulling the purchase of Shell Canada's outlets in Qubec and the Maritime Provinces, according to a report by the Canadian Press. "Certainly we will be looking at that," CEO Bob Espey said during a conference call Friday, a day after the company reported a quadrupling in first-quarter profit.
Earlier this month, Shell said it was looking for an "appropriate steward" to take control of the 260 stations, while still operating them under the Shell brand.
Parkland, based in Red Deer, Alberta, already has a deal in place to sell lubricants under the Shell banner.
"Parkland currently touches 5% of the fuel that flows through the Canadian downstream market, and that's roughly a 75 billion-liter market," Espey said. "So we do see plenty of opportunity to continue to grow within that space."
Observers have also pointed to Laval, Quebec-based convenience store operator Alimentation Couche-Tard as a potential buyer for the Shell stations, since it, too, has been seeking to grow through acquisitions. Truro, Nova Scotia-based Wilson Fuels Inc. may also be interested, according to reports.
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Shell's move to sell the stations is typical of what other major oil and gas companies, like Imperial Oil Ltd. and its U.S. parent ExxonMobil Corp., have been doing recently, Espey said. They have been retreating somewhat from the downstream side of the business in favor of investing in the upstream, or oil and natural gas production.
xt "It's not a fast retreat. They certainly still have very good assets in good markets that provide good returns to them that they're not in a position at this point to divest," Espey said.
"But it is a trend, and a trend that we see continuing and a trend that we can participate in."
Parkland used to be focused on Western Canada, said the report, but has since expanded nationally through a series of acquisitions.
In June 2009, it announced plans to buy Victoria-based Columbia Fuels Ltd. for $34.5 million.
In December of that year, it snagged Dartmouth, N.S.-based Bluewave Energy, which sells Shell-branded fuel throughout most of Canada, for $214 million. A year later, it paid $22.6 million to acquire Island Petroleum Products, a fuel supplier in Prince Edward Island.
Late Thursday, Parkland reported $16.3 million in net income and $955 million of revenue in the three months ended March 31. That's up from $3.7 million of net income and $675.2 million of revenue a year earlier. Fuel volume increased by 25% to about 1 billion liters (264.2 million U.S. gallons).
Red Deer, Alberta-based Parkland is Canada's largest independent marketer and distributer of fuels, managing a nationwide network of sales channels for retail, commercial, wholesale and home heating fuel customers. Parkland's mission is to be the most trusted source of convenience for fuel and related products focused on nonurban markets. Its family of brands includes Fas Gas Plus, Race Trac Gas, Bluewave Energy, Columbia Fuels, Great Northern Oil, Neufeld Petroleum & Propane, United Petroleum Products and Island Petroleum.
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