Mergers & Acquisitions

Pioneer's Ontario Stations Key to Parkland's Supply Strategy

Deal will allow Suncor to focus on Petro-Canada retail network

RED DEER, Alberta -- As part of its strategy to expand in the Ontario market, Parkland Fuel Corp. has entered into a definitive agreement to acquire the assets of Pioneer Energy, Burlington, Ontario, for $378 million (Canadian; $344.2 million U.S.), including its major retail network in the Canadian province.

Parkland Pioneer Suncor Canada (CSP Daily News / Convenience Stores / Gas Stations)

As reported in a 21st Century Smoke/CSP Daily News Flash, with the deal, Red Deer, Alberta-based Parkland adds 393 gas stations--319 in Ontario and 74 in Manitoba--increasing its national footprint to more than 1,000 stations, or approximately 9% of the Canadian retail fuel market. It includes 148 Pioneer-branded and 228 Esso-branded stations, many in prime urban locations. Pioneer's network gas stations includes 152 company and 241 independent dealer locations.

"We have long recognized the Ontario retail marketplace as a critical growth opportunity for Parkland, aligning with Parkland's overarching supply strategy," said Bob Espey, president and CEO of Parkland. "We also recognize Pioneer Energy as one of Canada's most respected independent retail fuel marketers, having built Pioneer into the strongest independent retail fuel brand in Ontario. Given the Pioneer Group's sophisticated understanding of the retail fuel industry, their investment in Parkland is a strong endorsement of our strategy, and we look forward to welcoming their team.

He continued, "Our five-year growth plan has progressed rapidly as a result of our team's ability to identify and execute disciplined transactions. We continue to anticipate additional accretive acquisitions, adhering to our disciplined approach to growth."

Subject to the satisfaction of closing conditions and closing adjustments, the assets of Pioneer will be purchased for $378 million, including $259 million ($236.6 million U.S.) in cash, $119 million ($108.7 million U.S.) in common shares of Parkland, and the assumption of standard operating liabilities. At 6.9 times Pioneer's trailing twelve month EBITDA of approximately $55 million, this acquisition is both accretive and attractively priced for a premier retail fuel network.

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Pioneer's current joint owners, The Pioneer Group Inc. and Suncor Energy Inc., will receive the following consideration: The Pioneer Group will receive $76 million ($69.4 million U.S.) or 39% of their total consideration in cash and $119 million ($108.7 million U.S.) or 61% of their total consideration in common shares of Parkland; Suncor will receive $183 million ($167.2 million U.S.) in cash.

"Through our Petro-Canada business, we are the largest retailer of petroleum products in the country, with our vast network of over 1,400 retail outlets and 200 Petro-Pass truckstops," said Kris Smith, executive vice president of refining and marketing for Calgary, Alberta-based Suncor. "The sale of these assets is consistent with our business strategy allowing us to focus on the assets in our own Petro-Canada branded retail and wholesale networks."

Pioneer distributes more than two billion liters (528.3 million gallons) of fuel annually through its gas stations and a recently acquired commercial operation in Ontario, New Brunswick and Nova Scotia. Pioneer currently distributes 5.1% of total retail fuel volumes across Canada and has a 12% share of the Ontario and Manitoba retail gas markets.

Tim Hogarth, CEO and executive chairman of Pioneer, is expected to be appointed to Parkland's board upon completion of the acquisition.

The deal is subject to the receipt of customary third-party consents and regulatory approvals, including approvals from the Toronto Stock Exchange and the Competition Bureau.

Parkland also owns gas stations and convenience stores in the United States. In Jan. 2014, it purchased Minot, N.D.-based Superpumper-Farstad Oil, known as SPF Energy.

Parkland is Canada's largest independent marketer and distributor of fuels, managing a nationwide network of sales channels for retail, commercial, wholesale and home heating fuel customers. It is a leading fuel and convenience marketer, operating retail fuel and convenience store businesses under the Fas Gas Plus, Race Trac Esso, and Short Stop Food Store brands.

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