Superior Plus Corp. and Certarus Ltd. have entered into a definitive agreement for Superior to acquire Certarus, a North American low carbon energy solutions provider for a total acquisition value of CAD 1.05bn, representing 8.5x 2022E EBITDA, according to a news release.
Under the terms of the acquisition, Superior will acquire all the outstanding common shares of Certarus, representing an equity value of CAD 853m and assume Certarus’ outstanding senior bank credit and leases with a total value of CAD 196m. The Certarus shareholders will receive CAD 353m in cash and CAD 500m of Superior common shares priced at $10.25 per share, representing approximately 17% pro forma ownership. The transaction has been unanimously approved by the Board of Directors of both Superior and Certarus and is expected to close in the first quarter of 2023, subject to customary closing conditions.
Certarus is a rapidly growing North American distributor of over-the-road low carbon fuels, including CNG, RNG and hydrogen. Through the use of mobile storage units (MSUs), Certarus delivers low cost and low carbon intensity energy alternatives to its customers. Certarus’ MSUs are interchangeable between CNG, RNG and hydrogen giving Certarus flexibility to service its customers across North America as they transition away from diesel and other distillates. Certarus provides a virtual pipeline to its customers that do not have infrastructure in place or are in need of supplemental infrastructure. Revenue is generated from fees for service to provide its lower cost and lower CI fuels, directly passing on changes in the commodity cost of its fuels to customers.
Certarus has 18 hubs throughout Canada and the U.S. and expects to have 640 MSUs by year end, making it the largest on-road low carbon fuels distributor in North America with approximately 85% of its revenue generated in the U.S. From 2020 to 2022E, Certarus has grown the number of MSUs by 37%, the volume of low carbon fuels delivered by approximately 76% to 57,000 MMBtu/d and is expected to maintain substantial growth as the demand for its products continues to increase. Over the same period, Certarus has more than doubled its Adjusted EBITDA2, with expected 2022 Adjusted EBITDA of $124 million, driven by continued volume and efficiency improvements.
Certarus’ rapid growth is the result of increasing customer demands to transition from higher cost and higher carbon intensity fuels such as diesel and other distillates to lower cost and lower carbon energy alternatives. The acquisition of Certarus accelerates Superior’s energy transition path with a business that is both rapidly growing and accretive to Superior’s financial results.
“The acquisition of Certarus is a highly strategic and transformative transaction for Superior as it represents an exciting opportunity for significant organic growth and provides our existing and new customers with the ability to meet their ESG goals through our low carbon energy distribution platform,” said Luc Desjardins, Superior’s president and CEO. “With our execution on the Superior Way Forward strategic initiatives in the past 24 months, we are ahead of our timing to achieve CAD 700m to CAD 750m in EBITDA from operations as we now expect to reach the lower end of the target by 2024.”
Curtis Philippon, Certarus’ President and CEO stated, “we are excited to be joining the Superior team. Certarus will benefit from Superior’s scale, portable fuel distribution expertise, and a shared commitment to safety. The joining of our businesses creates a strong platform upon which we can continue to grow and provide decarbonization solutions, including RNG and hydrogen.”
“We are thrilled to partner with Curtis and the team at Certarus,” said Angelo Rufino, Brookfield’s nominee on Superior’s board of directors and a member of Superior’s ad hoc Committee to evaluate Certarus. “Certarus’ low carbon and alternative fuel distribution platform provides an exciting new organic avenue of growth for Superior Plus and will further assist our core customers as they transition to a lower carbon future.”
Brookfield Asset Management made a USD 260m equity investment in Superior in 2020.
Superior intends to finance the Acquisition and related transaction expenses using a combination of approximately 48.8 million Superior common shares issued directly to Certarus shareholders valued at CAD 500m and incremental drawings from its expanded senior credit facilities.
The expanded senior credit facilities will increase to CAD 1.3bn from the current size of CAD 750m via the addition of a new CAD 550m senior secured credit facility with a three-year term. The New Credit Facility is fully committed with the CAD 550m provided by a group of lenders including Canadian Imperial Bank of Commerce, The Bank of Nova Scotia, The Toronto-Dominion Bank and National Bank of Canada.
CIBC Capital Markets is acting as exclusive financial advisor to Superior. Torys LLP is acting as Canadian legal counsel to Superior.
J.P. Morgan and National Bank Financial Inc. are acting as financial advisors to Certarus. TD Securities Inc. is acting as strategic advisor to Certarus. Burnet, Duckworth & Palmer LLP is acting as legal counsel to Certarus.
