TORONTO, Ontario -- In an effort to concentrate on the oil sands segment of the business, MCW Energy Group Ltd. management has decided to dispose of substantially all of the assets of MCW Fuels Inc., its fuel distribution business, selling them to an undisclosed company for $5 million (U.S.). It has executed a definitive agreement to sell its rights to distribute fuel to all of its branded and unbranded gas stations.
MCW Energy is a Canadian holding company involved in fuel distribution through MCW Fuels and the creation of oil sands extraction technology through MCW Oil Sands Recovery LLC.
MCW Fuels now supplies petroleum products to more than 500 U.S. West Coast gas stations and provides commercial fuels to more than 100 businesses. It has regional branding rights to brands such as 76, Valero and Alliance.
The potential for profit of the oil sands project substantially outweigh the small margins that are inherent in the fuel distribution business, which has been operating at a loss, the company said.
Pursuant to the terms of an asset purchase and sale agreement between MCW Fuels and an "arm's length" private California fuel distribution company, MCW Fuels has agreed to assign its fuel supply and distribution agreements for all of its branded and unbranded gas stations and certain related liabilities to the purchaser for $5 million (U.S.) payable at closing as well as an additional undisclosed amount by April 15, 2015, based on gross profits over a certain time frame.
The $5 million was directed to be paid to certain third parties to settle certain liabilities owed by MCW Fuels to two major fuel suppliers.
Assets of MCW Fuels excluded from the sale included, without limitation, a gas station, including associated goodwill, located in Thousand Oaks, Calif., all cash and cash equivalents; all accounts payables due to customers, suppliers and third parties; all accounts receivable, notes and other receivables from third parties, customers and related parties due to MCW Fuels; all prepaid expenses and deposits; all rights, title and interest to any real property leased or owned by MCW Fuels; and all intellectual property rights related to the name MCW.
The transaction is subject to certain conditions, including MCW obtaining all necessary consents and approvals. MCW Fuels may sell the assets to an alternate purchaser that offers MCW Fuels a more favorable purchase price in exchange for a $500,000 breakup fee.
For 75 years, MCW Fuels has been distributing oil and diesel products throughout western United States. Established in 1938, MCW Fuels now markets more than 150 million gallons of branded and unbranded fuels per year, with 2012 sales totaling $363.3 million (up from sales of $241.5 million in 2011 and sales of $188.7 million in 2010). Beginning with a single distributorship in Van Nuys, Calif., MCW Fuels has an acquisition program underway, purchasing Westco Petroleum Distributors Inc. and Ocean Pacific Fuels Inc. in 2012.
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