Federated Co-operatives Limited (FCL) has marked its largest retail acquisition in the co-operative’s history.
On Tuesday, FCL announced an agreement with Cenovus Energy Inc. to purchase 181 Husky retail fuel sites in an investment on behalf of local Co-ops totalling $264 million.
The acquired fuel sites include gas bars, on-site car washes and convenience stores in locations across Western Canada.
FCL said during a virtual news conference on Tuesday that the move will strengthen Co-ops’ presence in Western Canada and bring their unmatched service and support to new geographic areas.
“By building on our network of gas bars, FCL can increase the use and capacity of the Co-op Refinery Complex in Regina and the Co-op Ethanol Complex near Belle Plaine, Sask.,” said FCL CEO Scott Banda on Tuesday.
“Co-op members will also benefit from this acquisition as any increase in profitability is shared with Co-op members and those returns help build the communities of Western Canada.”
Banda also noted that the investment puts FCL in a position to move forward with initiatives such as transitioning to a low-carbon economy indicated by recent announcements highlighting planned investments in carbon capture and renewable diesel production.
“We are committed to enhancing the sustainability of our fuels and recognize the important role co-operatives play in responding to the needs of our communities, members and customers.”
FCL will transfer the sites to a number of independent local Co-ops once the deal is complete.
According to Banda, FCL partnered with Parkland Corporation to piece together the accepted offer. This came after Husky announced in 2019 that they would be placing assets up for sale.
The sale will see 337 sites be sold between Parkland and FCL at a bill totalling $420 million. 156 of those sites will go to Parkland for $156 million.
The Calgary-based company says it will sell 156 of the retail fuel stations to Parkland Corporation for $156 million.
Tony Van Burgsteden, vice-president of finance for FCL, noted how it was a three-year process between starts and stops and negotiations stalling in 2020 due to the COVID-19 pandemic.
He said once Husky and Cenovus announced a merger which was concluded in early 2021, the assets returned to the market in late summer of 2021.
“There were pretty rapid negotiations from that point forward and a tremendous amount of work by all the parties involved,” stated Van Burgsteden.
FCL says the purchase is subject to certain customary closing conditions, including a review by Competition Bureau Canada. Banda said this is a necessary step considering the magnitude of the transaction.
The review will also determine which sites will remain within the transaction or whatever dispositions FCL will have to make.
FCL expects the deal will likely close by mid-2022.
What does this mean for Co-op members
Banda said a main focus of this deal is to become more competitive in areas of the country Co-op has not yet touched.
He discussed how the size of this acquisition will allow Co-op to grow and create opportunity in Saskatchewan, along with preserving FCL’s retail network.
“All of that drives the economics of FCL overall, and if we can be more profitable as a group, we will then be able to distribute more patronage to local Co-ops and ultimately to individual members,” Banda explained.
The FCL CEO added that it’s also about growing the brand and system while filling in retail voids particularly felt in Alberta and British Columbia.
“This deal strikes a positive balance between the current and future needs of our Western Canadian customers.”