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Superior Plus Corp T.SPB

Alternate Symbol(s):  SUUIF

Superior Plus Corp. is a Canada-based distributor of propane, compressed natural gas, renewable energy and related products and services. Through its primary businesses, propane distribution and CNG, RNG and hydrogen distribution, it delivers clean burning fuels to residential, commercial, utility, agricultural and industrial customers. Its segments include U.S. Retail Propane Distribution (U.S. Propane), Canadian Retail Propane Distribution (Canadian Propane), North American Wholesale Propane Distribution (Wholesale Propane) and Certarus Ltd. (Certarus). The U.S. Propane segment distributes propane gas and liquid fuels primarily in the Eastern United States and California, as well as the Midwest to residential and commercial customers. The Canadian Propane segment distributes propane gas and liquid fuels across Canada to residential and commercial customers. The Wholesale Propane segment distributes propane gas and other natural gas liquids across Canada and the United States.


TSX:SPB - Post by User

Post by ace1mccoyon Jul 15, 2021 10:12am
193 Views
Post# 33548762

TD's Report on the Acquistion of Kamps Propane

TD's Report on the Acquistion of Kamps Propane
 
US$240mm Acquisition of Kamps Propane in California
 
Event
 
SPB has entered into an agreement to acquire Kamps Propane, a retail and
wholesale propane distribution company based in California, for US$240mm (C
$299mm). Expected close: Q3/2021.
 
Kamps is expected to generate pro-forma run-rate EBITDA including synergies of
~C$42mm (~9.1% of our 2022E EBITDA).
 
Impact: POSITIVE
 
Kamps is SPB's sixth acquisition in 2021, placing the company well on track
to achieve its five-year "Superior Way Forward" objective of deploying ~$1.9bn
of capital on acquisitions. We anticipate that pro-forma the recent acquisitions
(including Kamps and Freeman), leverage increases to slightly above the highend of the targeted range of 3.0-3.5x. Management had indicated at its investor
day that leverage may temporarily spike if a series of larger deals were executed
but that it is committed to keeping leverage below 4.0x. We estimate SPB has >
$400mm of current available liquidity (plus $300mm accordion feature).
 
Kamps Propane, founded in 1969, is an independent family-owned/operated
retail and wholesale propane distributor based in California servicing ~45,000
residential, commercial, and wholesale customers. Kamps has 14 retail branch
offices, five company-operated rail terminals, over 375 vehicles and ~280
employees. Currently, SPB has a relatively small presence in California, largely
focused on wholesale propane distribution. However, the acquisition of Kamps
provides a beachhead for future residential tuck-under acquisitions in California
and also helps build scale in the western U.S., which could make entry into new
states more attractive as well (Nevada, Arizona and Orgeon). Recall, ~80% of
SPB's U.S. business is located in the Northeast.
 
Valuation (~7.1x post synergies and normalized weather): The US$240mm
cash purchase price equates to ~8.9x EBITDA of US$27mm. However, SPB
expects the business to generate run-rate EBITDA of ~US$34mm (C$42mm) after
realizing synergies of at least 25% and assuming weather consistent with the
five-year average (post-synergy multiple: ~7.1x EBITDA). The valuation is in line
with SPB's targeted multiple of ~7.5x announced as part of its "Superior Way
Forward" strategy and the recent similar sized acquisitions of Rymes and Freeman
(Freeman ~7.7x post-synergies and Rymes ~5.9x post synergies - lower multiple
reflects Rymes mix of both heating oil and propane customers.
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