Superior Plus Corp

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Superior Plus Corp

Closing Of Canwest Propane

Our Conclusion

Following SPB’s announcement of the closing of its acquisition of Canwest Propane, we are coming off restriction with a $13.50 price target and Neutral rating (both unchanged). The net effect of increased leverage largely offsets our higher EBITDA estimates. We view the close of the transaction and the competition bureau requirement to divest only ~5% of acquired Canwest retail propane volumes as positive developments. SPB continues to anticipate at least $20MM in run-rate synergies by Q2/19, and we expect SPB to realize synergies in the range of $5MM-$10MM for 2018.

Implications

$20MM in Synergies Confirmed; $5MM-$10MM in 2018: SPB confirmed that it expects to capture at least $20MM in annual synergies. SPB anticipates achieving run rate synergies of $15MM by the end of 2018, with the remaining run rate synergies of at least $5MM to be
achieved by the end of the Q2/19. Note, our 2018 EBITDA estimates account for $5MM-$10MM in synergies.

~$45MM Contribution From Canwest To 2018 Estimates: SPB estimates that the required divestures (5 branches and 9 satellite locations) account for less than 5% of Canwest’s adjusted TTM EBITDA of $38MM. We understand that these locations are located in rural
areas and non-industrial in nature. Note that along with anticipated synergies, we are currently modelling in $45MM of incremental EBITDA for 2018 ($335MM).

No Change To 2017 Guidance: SPB is maintaining its 2017 AOCF per share guidance of $1.50 to $1.75, which does not include any of the anticipated synergies from the transaction since most of these are not anticipated to occur until after the winter heating season.Pro-forma Leverage Within Guidance Range: Superior previously fully funded the acquisition of Canwest with its senior credit facility. Pro forma the completion of the transaction, Superior’s total debt to adjusted EBITDA multiple is 3.5x which is within the previously announced 2017 guidance range for total debt to adjusted EBITDA of 3.2x to 3.6x.