SPB Superior Plus Corp

Superior Plus Corp. (“Superior”) (TSX: SPB) is pleased to announce that it has entered into an agreement to acquire the retail propane distribution and refined fuels assets of Quarles Petroleum Inc. (the “Quarles Delivered Fuels Business”) for an aggregate purchase price of approximately US$145 million ($180 million) before adjustments for working capital (the “Acquisition”).

The Acquisition, which is subject to customary regulatory and commercial closing conditions, is anticipated to close in the second quarter of 2022.

Acquisition Highlights

• Aligned with Superior’s core strategy of investing in high quality businesses that are in desirable geographies and that can increase Superior’s existing stable free cash flow through the realization of synergies.
• Benefits retail propane customers by bringing Superior’s fuel distribution expertise, integrated platform and operational effectiveness to a new customer base.
• Anticipated recurring annual EBITDA including estimated synergies of approximately US$19 million ($24 million) providing an attractive acquisition valuation.
• Expected to modestly increase Superior’s 2022 Adjusted EBITDA due to the anticipated timing of the closing of the Acquisition and the seasonality of operations.
• Pro forma the Acquisition and bought deal equity offering, Superior expects to immediately be within its Total Net Debt to Adjusted EBITDA target range of 3.5x to 4.0x.

Founded in 1940, the Quarles Delivered Fuels Business (“Quarles”) is an established retail propane distributor servicing approximately 55,000 residential and commercial customers primarily in Virginia. Quarles has 29 propane bulk plants, one rail terminal, approximately 3 million gallons of storage capacity, a fleet of 197 vehicles and approximately 181 employees.

On a normalized basis, including the achievement of expected synergies and weather consistent with the five-year average, Superior expects Quarles to generate approximately US$19 million ($24 million) in Adjusted EBITDA on an annual run-rate basis 24 months following the close of the Acquisition.

“We are very pleased to enter into this transaction which expands our ability to serve propane customers in Virginia,” said Luc Desjardins, Superior’s President and CEO. “Quarles is a high quality business and we look forward to welcoming the team to Superior and further improving the already outstanding customer service that Quarles provides to its customers. The acquisition of Quarles is representative of the acquisition opportunities we are seeing in the market today, and advances us further towards our previously announced 2026 EBITDA from operations growth objectives. This acquisition, coupled with the cold weather in January and February, is a good start to 2022 for Superior.”

Beth Summers, Executive Vice-President and Chief Financial Officer stated “Superior's ability to access capital markets with strong support from our underwriters demonstrates confidence in Superior's existing operations and the Superior Way Forward strategy. The issuance of common equity accelerates our debt reduction plan and is expected to provide us with the funding to achieve the Superior Way Forward acquisition goal of $1.9 billion in acquisitions, at a rate of approximately $250 million in acquisitions annually, while achieving our leverage target of 3.5x to 4.0x.”

Bought Deal Equity OfferingSuperior has entered into an agreement with a syndicate of underwriters bookrun by CIBC Capital Markets (collectively the “Underwriters”), pursuant to which the Underwriters have agreed to purchase on a bought deal basis, an aggregate of 22,322,000 common shares (the “Shares”) at an offering price of $11.20 per Share (the “Offering Price”) for total gross proceeds to Superior of approximately $250 million (the "Offering"). Brookfield, through its Special Investments program, is participating as an anchor investor in the Offering and is committed to purchase approximately $75 million in Shares at the Offering Price. In connection with the Offering, Superior has granted the Underwriters an over-allotment option, exercisable in whole or in part, at any time for a period of 30 days following the closing of the Offering, to purchase up to an aggregate of an additional 3,348,300 Shares at the Offering Price.

The net proceeds of the Offering will be used to reduce existing indebtedness and for general corporate purposes including to fund future acquisitions.

The Offering will be made in all provinces and territories of Canada by way of a prospectus supplement (the “Prospectus Supplement”) to Superior’s base shelf prospectus dated May 25, 2021. Completion of the Offering is subject to certain conditions including receipt of all necessary approvals, including the approval of the Toronto Stock Exchange. The Offering is expected to close on or about April 6, 2022.

Further information regarding the Offering, including related risk factors, will be set out in the Prospectus Supplement that Superior expects to file on SEDAR on or before March 30, 2022. Once filed, the Prospectus Supplement will be available on Superior’s profile on SEDAR at www.sedar.com.

The securities referred to herein have not been and will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. This news release does not constitute an offer to sell or the solicitation of any offer to buy, nor will there be any sale of these securities, in any province, state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such province, state or jurisdiction.

About the CorporationSuperior is a leading North American distributor and marketer of propane and distillates and related products and services, servicing over 890,000 customer locations in the U.S. and Canada.

For further information about Superior, please visit our website at: www.superiorplus.com or contact: Beth Summers, Executive Vice President and Chief Financial Officer, Tel: (416) 340-6015, or Rob Dorran, Vice President, Capital Markets, Tel: (416) 340-6003, E-mail: investor-relations@superiorplus.com, Toll Free: 1-866-490-PLUS (7587).

Forward Looking InformationThis news release contains certain forward-looking information and statements that are based on Superior’s current expectations, estimates, projections and assumptions in light of its experience and its perception of historical trends. In this news release, such forward-looking information and statements can be identified by terminology such as “approximately”, “anticipated”, “will”, and similar expressions. In particular, this news release contains forward-looking statements with respect to, among other things, the successful completion of the Acquisition and the timing thereof; expected benefits of the Acquisition, the expected impact of the Acquisition on 2022 Adjusted EBITDA, estimated run-rate Adjusted EBITDA of the Acquisition twenty-four months after closing, anticipated synergies, the proposed timing and completion of the Offering, the Superior Way Forward acquisition goal of $1.9 billion in acquisitions by 2026 while achieving our leverage target of 3.5x to 4.0x and the use of the net proceeds of the Offering.

Forward-looking information is not a guarantee of future performance. By its very nature, forward-looking information involves inherent assumptions, risks and uncertainties, both general and specific, and risks that predictions, forecasts, projections and other forward-looking information will not be achieved, including risks relating to satisfaction of the conditions to, and completion of, the Acquisition and the Offering, risks relating to the operating and financial performance of the Energy Distribution business which are described in Superior’s management’s discussion and analysis for the year ended December 31, 2021 and in Superior’s annual information form for the fiscal year ended December 31, 2021. Key assumptions or risk factors to the forward-looking information include, but are not limited to, the satisfaction of the conditions, including receipt of required regulatory approvals, to the Acquisition, without significant changes to the terms or anticipated timing of the transaction, the rate and size of future acquisitions, financial market conditions, Superior’s future debt levels, Superior’s ability to generate sufficient cash flows from operations to meet its current and future obligations, access to, and terms of, future sources of funding for Superior’s capital expenditures and acquisitions, the integration of businesses into Superior’s operations, competitive action by other companies, availability and timing of acquisition targets, actions by governmental authorities including increases in taxes and changes in environmental and other regulations, general economic, market and business conditions, accuracy of and ability to realize estimated synergies, timing to achieve synergies and the regulatory framework that governs the operations of Superior’s business and industry capacity. Should one or more of these risks and uncertainties materialize, or should assumptions described above prove incorrect, Superior’s actual performance and results in future periods may differ materially from any projections of future performance or results expressed or implied by such forward-looking information. We caution readers not to place undue reliance on this information as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations and anticipations, estimates and intentions expressed in such forward-looking information.

Forward-looking information contained in this news release is provided for the purpose of providing information about management’s goals, plans and range of expectations for the future and may not be appropriate for other purposes. Any forward-looking information is made as of the date hereof and, except as required by law, Superior does not undertake any obligation to publicly update or revise such information to reflect new information, subsequent or otherwise.

Non-GAAP Financial MeasuresIn this press release, Superior has used the following terms (“Non-GAAP Financial Measures”) that are not defined by International Financial Reporting Standards (“IFRS”) but are used by management to evaluate the performance of Superior and its business: Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) and Total Debt to Adjusted EBITDA leverage ratio. These measures may also be used by investors, financial institutions and credit rating agencies to assess Superior’s performance and ability to service debt. Non-GAAP Financial Measures do not have standardized meanings prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Securities regulations require that Non-GAAP Financial Measures are clearly defined, qualified and reconciled to their most comparable IFRS financial measures. Except as otherwise indicated, these Non-GAAP Financial Measures are calculated and disclosed on a consistent basis from period to period. Specific items may only be relevant in certain periods. See “Non-GAAP Financial Measures” in Superior’s most recent Management’s Discussion and Analysis (“MD&A”) for a discussion of Non-GAAP Financial Measures used by Superior and certain reconciliations to IFRS financial measures.

The intent of Non-GAAP Financial Measures is to provide additional useful information to investors and analysts, and the measures do not have any standardized meaning under IFRS. The measures should not, therefore, be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS. Other issuers may calculate Non-GAAP Financial Measures differently. Investors should be cautioned that Adjusted EBITDA should not be construed as an alternative to net earnings, cash flow from operating activities or other measures of financial results determined in accordance with GAAP as an indicator of Superior’s performance. Non-GAAP Financial Measures are identified and defined as follows:

Adjusted EBITDAAdjusted EBITDA represents earnings before interest, taxes, depreciation, amortization, losses (gains) on disposal of assets, finance expense, restructuring costs, transaction and other costs, and unrealized gains (losses) on derivative financial instruments. Adjusted EBITDA is used by Superior and certain investors to assess its consolidated results and ability to service debt. Adjusted EBITDA is reconciled to net earnings before income taxes.

Total Debt to Adjusted EBITDA Leverage Ratio and Pro Forma Adjusted EBITDAAdjusted EBITDA for the Total Debt to Adjusted EBITDA Leverage Ratio is defined as Adjusted EBITDA calculated on a 12-month trailing basis giving pro forma effect to acquisitions and dispositions adjusted to the first day of the calculation period (“Pro Forma Adjusted EBITDA”). Pro Forma Adjusted EBITDA is used by Superior to calculate its Total Debt to Adjusted EBITDA Leverage Ratio.

To calculate the Total Debt to Adjusted EBITDA Leverage Ratio divide the sum of borrowings before deferred financing fees and lease liabilities by Pro Forma Adjusted EBITDA. Total Debt to Adjusted EBITDA Leverage Ratio is used by Superior and certain investors to assess its ability to service debt.