BLD is getting $41-million from Superior Plus IncoBallard strikes financing deal with Superior Plus
Deal ends era of severe losses for fuel cell maker; propane distributor gains valuable tax losses to ease transition from a trust
DAVID EBNER
October 31, 2008
VANCOUVER -- Ballard Power Systems Inc. is getting $41-million from Superior Plus Income Fund in an unusual deal where Ballard is selling the shell of its corporate structure, along with $800-million of tax losses, and creating a new company to house its existing business.
The arrangement gives Calgary-based Superior Plus, a propane distributor, valuable tax losses to ease its transition from a trust to a standard corporate structure, reducing the taxes it pays and freeing up funds for a shareholders' dividend equivalent to the monthly distributions it now pays to unitholders.
Vancouver-based Ballard gets cash to bolster its balance sheet, so it doesn't need to raise new equity or take on debt in a challenging market to generate growth for its fuel cell products in areas such as back-up power for telecommunications networks.
"It's a bit unusual but the deal itself is pretty straight forward for Ballard shareholders," John Sheridan, chief executive officer of Ballard, said late yesterday. The deal was announced after markets closed.
Ballard shareholders will not notice any changes and their holdings are not affected. The Ballard name will be retained.
Such transactions could become more common, Mr. Sheridan said, though it is unlikely there will be a flurry of them immediately because income trusts have until the end of 2013, to reorganize their businesses as corporations.
There have already been a handful of similar deals. Bonterra Energy Income Trust in mid-August bought a small private oil and natural gas producer and its $74-million in tax losses, in a process that will see the trust become Bonterra Ltd.
Ballard has looked for several years for ways to capitalize on its tax losses, Mr. Sheridan said.
The company made its name in the late 1990s as a developer of automobile fuel cells. That line of business was sold in January to auto makers Daimler AG and Ford Motor Co. because Ballard wanted to focus on sectors where fuel cells were closer to commercial application.
Ballard gained $87-million (U.S.) on the sale, ending an era of severe losses. In just three years, from 2005 to 2007, Ballard lost $325-million, double its revenues of $158-million.
Ballard shareholders and unitholders of Superior still must approve the deal.
BALLARD POWER (BLD)
Close: $2.85, up 5¢
SUPERIOR PLUS (SPF.UN)
Close: $10, up 5¢