Superior Plus Corp T.SPB

Oilweek's article on the latest acquisition

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Jan 20, 2010 2:24:00 PM MST
Superior Plus to acquire Griffith Holdings in New York, cuts full year outlook (Superior-Plus-Takeove)

CALGARY _ Superior Plus Corp. (TSX:SPB) is expanding its U.S. fuel distribution business with its US$125-million acquisition of Griffith Holdings Inc. in upstate New York.

The Calgary-based energy, chemical and construction products company is also warning that the effects of the recession on its business will stretch well into 2010.

Griffith, a propane and heating oil distributor with about 500 employees, fits well with operations Superior Plus already has in New York state, said chairman and chief utive Grant Billing.

"It really does complete the puzzle for us," he told analysts on a conference call Wednesday. "It has a significant propane component which obviously is important given our heritage in the propane distribution business."

Griffith has 27 branch locations, 26 bulk storage facilities and three storage terminals providing 20 million gallons of capacity.

"It brings a full slate of management and information systems with it that we´ll be able to use as we build out the U.S. heating oil business further."

The transaction was slated to close later Wednesday.

Superior said the heating oil and propane distribution business is highly fragmented in the northeastern United States and eastern Canada so the company intends to pursue more acquisitions in that industry.

"We don´t see that as something we necessarily need to do in the short term, but we´ll certainly continue to look at that as we go through the year," Billing said.

Superior Plus expects the acquisition will add five cents per share in operating cash flow during 2010, though the company is taking a somewhat pessimistic view about what the year in general has in store.

The company is forecasting adjusted operating cash flow of between $1.95 and $2.15 per share, down from its earlier prediction of $2.05 to $2.25.

"While the recession seems to have ended, some days it doesn´t feel like it," Billing told the conference call.

"We are seeing signs of improvement in all of our customer bases and our businesses, but it is difficult to measure exactly how quickly that is going to come along. It has certainly been slower than we have hoped, and I´m sure many have hoped."

Superior Plus also said Wednesday that it has signed a deal with a syndicate of underwriters co-led by Scotia Capital, National Bank Financial and TD Securities to raise $60 million in an offering of shares that will be used to help fund the takeover.

The company said it would issue 4.35 million shares at $13.85 per share. The underwriters have also been granted an over-allotment option for up to an additional 652,500 shares.

If the option is exercised in full, the company will raise $69 million.

Shares in Superior Plus closed down 68 cents at $14.15 on the Toronto Stock Exchange on Wednesday.

Superior Plus operates three main businesses: distribution of propane and distillates and related fixed-price energy services production of specialty chemicals and sales of construction products.

Warm fall weather affected the energy distribution and services business, as consumers bought less heating oil to keep their homes warm.

A doubling in the wholesale price of propane between October and the end of 2009 also affected that part of the business, Billing said.

"Whenever costs go up that fast, we just can´t pass it along to our customers fast enough," he said.

An expansion to a chemical plant in Port Edwards, Wis., did not reach capacity until the end of December, so production there did not contribute to Superior Plus´ fourth-quarter earnings. The plant is now operating at pre-expansion levels.

In the construction products business, a recent strengthening in the housing market is cause for some optimism, though it may take some time for those effects to register on the company´s bottom line.

"But we have to remember that if we start a house now, we don´t really get to put drywall and insulation into it until probably the third quarter, maybe even the fourth quarter," Billing said.

"It takes a few months to get the houses up to a level where we can participate in that expansion."

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