Superior Plus to Acquire NGL’s Retail Propane Business - Significantly Expanding its U.S. Energy Distribution Platform

Source Press Release
Company Superior Plus CorpNGL Energy Partners LP 
Tags Corporate Deals, Deals, Refining & Marketing Activities
Date May 30, 2018

Superior Plus Corp. (“Superior”) (TSX:SPB) is pleased to announce that it has entered into an agreement with NGL Energy Partners LP (“NGL Energy”) (NYSE:NGL) to acquire all of the outstanding equity interest in NGL Propane, LLC (“NGL Propane”), NGL Energy’s retail propane distribution business, for total cash consideration of US$900 million (Cdn$1.17 billion) subject to customary closing adjustments (the “Transaction”).

“The acquisition of NGL Propane is a highly strategic and transformative transaction for Superior and represents an exciting opportunity to leverage our current core competencies and integrated supply capacities with NGL Propane’s strong Eastern U.S. retail platform,” said Luc Desjardins, CEO of Superior. “The acquisition of NGL Propane significantly expands our U.S. propane distribution business and solidifies Superior as a leading North American propane distributor. I am looking forward to working with the management and employees of NGL Propane and the many brands it operates under.”

Transaction Highlights

Strategically Compelling

  • Aligned with Superior’s core strategy of investing in established businesses that are in desirable geographies and generate stable free cash flow.

  • Expands Superior’s Energy Distribution footprint and scale in the U.S. and solidifies Superior as a leading retail propane distributor in North America.

  • Leverages Superior’s existing expertise, integrated platform and operational effectiveness into a new, large and complementary customer base.

  • Platform for expansion opportunities in the U.S. with a contiguous presence throughout the Eastern U.S. providing enhanced synergy opportunities on future acquisitions in a highly fragmented industry.

Financially Attractive

  • High-quality, stable cash flow and earnings profile from a business with loyal customers and consistent gross margin profile.

  • Strong cash flow accretion with the Transaction expected to be immediately accretive to adjusted operating cash flow (“AOCF”)1 before the realization of synergies and to produce double-digit AOCF accretion when annualized run-rate synergies are included2.

  • Expected to generate significant run-rate synergies estimated at US$20-25 million (Cdn$26-32 million) within 24 months after closing, primarily from cost savings and operational efficiencies.

  • Rapid deleveraging profile with anticipated total leverage of 3.7x Adjusted EBITDA3 (including annualized run-rate synergies) at Transaction close projected to decrease to 3.0x by the end of 2020.

NGL Propane sells propane and distillates to over 316,000 residential, commercial and industrial customers. NGL Propane, with over 1,000 employees in 151 locations (including 61 satellite distribution locations) and a fleet in excess of 1,000 trucks, services 22 states in the Northeast U.S., Southeast U.S. and Upper Midwest U.S. NGL Propane, trades under prominent regional brands, including Osterman Propane, Downeast Energy, Eastern Propane, Atlantic Propane, Anthem Propane, Gas Inc. and Brantley Gas.

During the twelve months ended March 31, 2018, NGL Propane sold approximately 182 million gallons of fuel generating approximately US$85 million (Cdn$111 million) in Adjusted EBITDA4. On a normalized basis, including contributions from acquisitions completed during the year Adjusted EBITDA would have been approximately US$90 million5 (Cdn$117 million). With estimated run-rate synergies of approximately US$20-25 million (Cdn$26-32 million), the Transaction is expected to be double digit accretive to AOCF on a run-rate basis6.

Closing of the Transaction, which is expected to occur in Q3 2018, is subject to customary closing conditions, including antitrust approvals in the United States. The Transaction is not subject to any due diligence or financing conditions.

Financing Summary

In conjunction with the Transaction, Superior also announced that it has entered into an agreement with a syndicate of underwriters co-led by TD Securities Inc. and CIBC Capital Markets to issue, on a bought deal basis, approximately Cdn$400 million of subscription receipts (the “Subscription Receipts”) to finance a portion of the purchase price in respect of the Transaction (the “Offering”) with the remainder being financed with a combination of a draw on Superior's revolver and a senior secured bridge credit facility.

Subscription Receipt Offering

In order to finance a portion of the purchase price in respect of the Transaction, Superior has entered into an agreement with a syndicate of underwriters (the “Underwriters”) co-led by TD Securities Inc. and CIBC Capital Markets to sell 32,000,000 Subscription Receipts on a bought deal basis. The Subscription Receipts will be offered at a price of Cdn$12.50 per Subscription Receipt (the “Offering Price”), for aggregate gross proceeds to Superior of Cdn$400 million. Superior has also granted the Underwriters an over-allotment option to purchase up to an additional 4,800,000 Subscription Receipts (or, in certain circumstances, common shares), on the same terms and conditions as the Offering, exercisable no later than 30 days after the closing of the Offering.

Superior also entered into a Cdn$400 million senior unsecured bridge facility to backstop the Offering which Superior intends to cancel upon closing of the Offering.

Each Subscription Receipt represents the right of the holder to receive, upon closing of the Transaction, without payment of additional consideration, one common share of Superior plus an amount per common share equal to the amount per common share of Superior of any dividends for which record dates have occurred during the period from the closing date of the Offering to the date immediately preceding the closing date of the Transaction, less withholding taxes, if any.

On or before June 1, 2018, Superior will file with the securities commissions or other similar regulatory authorities in each of the provinces and territories of Canada, a prospectus supplement to Superior’s short form base shelf prospectus relating to the issuance of the Subscription Receipts. Closing of the Offering is expected to occur on or about June 8, 2018, subject to TSX and other necessary regulatory approvals. The net proceeds from the Offering will be used to finance, in part, the Transaction once the proceeds are released from escrow.

This press release is not an offer of the securities for sale in the United States. The securities may not be offered or sold in the United States absent registration or an available exemption from the registration requirements of the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”) and applicable U.S. state securities laws. Superior will not make any public offering of the securities in the United States. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful.

Debt Financing

In order to finance the remainder of the Transaction, Superior’s wholly owned subsidiaries, Superior Plus US Financing Inc. and Superior Plus LP (“Superior LP” and, together with Superior Plus US Financing Inc., the “Borrowers”), have entered into a commitment letter with The Toronto-Dominion Bank and Canadian Imperial Bank of Commerce, pursuant to which such lenders have committed, subject to customary conditions, to provide a US$400 million 12-month senior secured bridge credit facility. For the remainder, Superior intends to draw on its current revolving credit facilities. Superior is also considering implementing longer term debt financing alternatives.

Advisors and Counsel

TD Securities Inc. and CIBC Capital Markets are acting as financial advisors to Superior. Orrick, Herrington & Sutcliffe LLP and Torys LLP are acting as legal counsel to Superior.

Conference Call and Webcast Information

Superior will host a conference call on May 30, 2018 at 4:45 p.m. Eastern Time, or 2:45 p.m. Mountain Time, for members of the investment community to discuss the Transaction. The dial-in for the conference call is 1-(855) 859-2056, Conference ID: 7298346. A link for the webcast will be made available on Superior’s website at  prior to the conference call.

An audio recording of the conference call will be made available shortly after the call on Superior’s website at .

2018 Investor Day

Superior’s Investor Day will be postponed from Friday, June 1, 2018 to Friday, June 15, 2018 at the One King West Hotel in Toronto, Ontario. For parties interested in attending the event, please email investor-relations@superiorplus.com to request an invitation.  

Source: EvaluateEnergy® ©2018 EvaluateEnergy Ltd