Finning to Acquire 4Refuel, the Canadian Leader in Mobile On-Site Refueling Services
- 4Refuel is the leading mobile on-site refueling company in Canada, supporting customers in the construction, transportation, oil & gas, power generation and other industrial sectors.
- 4Refuel provides a mission critical solution with 24×7 service coverage that improves customer productivity, lowers total cost of equipment ownership, and enhances safety across all equipment brands.
- Purchase price is approximately $260 million, which equates to 7.8 x 2018 estimated EBITDA(1)(2), excluding synergies.
- Transaction will be funded with cash on hand and from existing credit facilities, and will be immediately accretive to earnings per share and free cash flow(2) in 2019, before synergies.
- Acquisition is expected to generate meaningful synergies with opportunities to expand Finning’s product and service offering to 4Refuel’s customers across western Canada and grow the mobile on-site refueling business through Finning’s customer network.
VANCOUVER, British Columbia, Dec. 10, 2018 (GLOBE NEWSWIRE) — Finning International Inc. (“Finning” or the “Company”) (TSX: FTT) announced today that it has reached an agreement to acquire 100 percent of 4Refuel Canada and 4Refuel US (“4Refuel”) for approximately $260 million. In 2018, 4Refuel is expected to generate net revenue(3) of approximately $110 million and EBITDA of $33.5 million. Greater than 95 percent of 4Refuel’s profitability is generated in Canada.
4Refuel pioneered mobile on-site refueling and has built an unmatched market presence across Canada, employing about 600 people and serving over 3,400 customers.
As a fuel management business, service is at the core of 4Refuel’s expertise. The company refuels customer equipment directly on site, mostly during off hours when equipment is idle. This ensures physical availability of customers’ equipment, while maximizing productivity of their operations. Customers benefit from 4Refuel’s Fuel Management Online System, which allows customers to optimize on-site refueling to save time and money. 4Refuel’s approach combined with Finning’s connected asset network will generate new insights into how to better support customer needs.
“This transaction is a great example of a Caterpillar complementary bolt-on acquisition that accelerates our customer-centric growth strategy. With this investment we will provide new and existing customers with additional services to improve productivity and decrease their total cost of equipment ownership,” said Scott Thomson, president and CEO of Finning.
Meaningful synergies are expected to be generated through the acquisition. Approximately 50 percent of 4Refuel’s customers are based in western Canada. By combining forces, Finning will have the opportunity to sell equipment, product support, rental and more value-added services to a customer base that is currently not taking advantage of Finning’s full suite of services. Furthermore, 4Refuel will have the opportunity to sell more fuel services to Finning’s 18,000 plus customers enabled, in large part, by connectivity. Finally, the overlapping geographies and supply chains present opportunities to gain efficiencies, optimize routes and improve customer service.
The transaction is subject to customary regulatory approvals and is expected to close early in 2019.
Investor Call Information
The Company will hold an investor call to discuss this transaction on December 11, 2018 at 9:00 am Eastern Time. Dial-in numbers: 1-800-319-4610 (Canada and US), 1-416-915-3239 (Toronto area), 1-604-638-5340 (international). The call will be webcast live and archived for three months at: https://www.finning.com/en_CA/company/investors.html
Finning International Inc. is the world’s largest Caterpillar equipment dealer delivering unrivalled service to customers for 85 years. Finning sells, rents, and provides parts and service for equipment and engines to help customers maximize productivity. Headquartered in Vancouver, B.C., the Company operates in Western Canada, Chile, Argentina, Bolivia, the United Kingdom and Ireland.
Founded in 1995, 4Refuel pioneered the mobile on-site refueling industry in Canada and has built an unmatched market presence in Canada and the US. Headquartered in Toronto, 4Refuel provides service to a range of large and small clients in construction, transportation, oil & gas, power generation and other industries. As the Canadian market leader, 4Refuel is the only national on-site fuel provider whose core business is direct-to-equipment on-site refueling. 4Refuel is currently owned Kelso & Co, Penske Truck Leasing, TRP Capital Partners, and Crescent Capital.
(1) Earnings Before Finance Costs, Income Taxes, Depreciation and Amortization (EBITDA). This is calculated as net income adding back income tax expense, finance costs, depreciation and amortization.
(2) These financial metrics, referred to as “non-GAAP financial measures”, do not have a standardized meaning under International Financial Reporting Standards (IFRS), which are also referred to herein as Generally Accepted Accounting Principles (GAAP), and therefore may not be comparable to similar measures presented by other issuers. For additional information regarding these financial metrics, including definitions, see the heading “Description of Non-GAAP Financial Measures and Reconciliations” in the Company’s Q3 2018 management discussion and analysis. Management believes that providing certain non-GAAP financial measures provides important information regarding the operational performance and related trends of the business. By considering these measures in combination with the comparable IFRS measures, management believes that users are provided a better overall understanding of the business and its financial performance during the relevant period than if they simply considered the IFRS measures alone.
(3) Net revenue is a non-GAAP financial measure. Net revenue is defined as revenue attributed to service fees for the delivery of fuel and is calculated as total revenue charged to customers less the cost of fuel which is paid in full by the customer. Fuel is considered as a pass through cost, therefore, management views net revenue as more representative in assessing the performance of this business.
Forward Looking Information
This news release contains statements about the Company’s business outlook, objectives, plans, strategic priorities and other statements that are not historical facts. A statement Finning makes is forward-looking when it uses what the Company knows and expects today to make a statement about the future. Forward-looking statements may include words such as aim, anticipate, assumption, believe, could, expect, goal, guidance, intend, may, objective, outlook, plan, project, seek, should, strategy, strive, target, and will. Forward-looking statements in this news release include, but are not limited to, statements with respect to: expected net revenue; estimated 2018 EBITDA; expected earnings per share and free cash flow in 2019; expected synergies and new business opportunities; and the expected timing and financial impact from the proposed acquisition of 4Refuel. All such forward-looking statements are made pursuant to the ‘safe harbour’ provisions of applicable Canadian securities laws.
Unless otherwise indicated by us, forward-looking statements in this news release reflect Finning’s expectations as of the date of this news release. Except as may be required by Canadian securities laws, Finning does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
Assumptions upon which such forward-looking statements are based include that all required regulatory and governmental approvals to the transaction will be obtained and all other conditions to completion of the transaction will be satisfied or waived. Many of these assumptions are based on factors and events that are not within the control of Finning and there is no assurance they will prove to be correct.
Forward-looking statements, by their very nature, are subject to numerous risks and uncertainties and are based on assumptions, which gives rise to the possibility that actual results could differ materially from the expectations expressed in or implied by such forward-looking statements and that Finning’s business outlook, objectives, plans, strategic priorities and other statements that are not historical facts may not be achieved. As a result, Finning cannot guarantee that any forward-looking statement will materialize. Factors that could cause actual results or events to differ materially from those expressed in or implied by these forward-looking statements include: risks related to the integration of the acquired company; general economic and market conditions; foreign exchange rates; commodity prices; the level of customer confidence and spending, and the demand for, and prices of, Finning’s products and services; Finning’s ability to maintain its relationship with Caterpillar; Finning’s dependence on the continued market acceptance of its products, including Caterpillar products, and the timely supply of parts and equipment; Finning’s ability to continue to improve productivity and operational efficiencies while continuing to maintain customer service; Finning’s ability to manage cost pressures as growth in revenue occurs; Finning’s ability to negotiate satisfactory purchase or investment terms and prices, obtain necessary regulatory or other approvals, and secure financing on attractive terms or at all; Finning’s ability to manage its growth strategy effectively; Finning’s ability to effectively price and manage long-term product support contracts with its customers; Finning’s ability to reduce costs in response to slowing activity levels; Finning’s ability to attract sufficient skilled labour resources as market conditions, business strategy or technologies change; Finning’s ability to negotiate and renew collective bargaining agreements with satisfactory terms for Finning’s employees and the Company; the intensity of competitive activity; Finning’s ability to raise the capital needed to implement its business plan; regulatory initiatives or proceedings, litigation and changes in laws or regulations; stock market volatility; changes in political and economic environments for operations; the occurrence of one or more natural disasters, pandemic outbreaks, geo-political events, acts of terrorism or similar disruptions; fluctuations in defined benefit pension plan contributions and related pension expenses; the availability of insurance at commercially reasonable rates or that the amount of insurance coverage will be adequate to cover all liability or loss incurred by Finning; the potential of warranty claims being greater than Finning anticipates; the integrity, reliability and availability of, and benefits from, information technology and the data processed by that technology; and Finning’s ability to protect itself from cybersecurity threats or incidents. Forward-looking statements are provided in this news release for the purpose of giving information about management’s current expectations and plans and allowing investors and others to get a better understanding of Finning’s operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking statements for any other purpose.
Except as otherwise indicated, forward-looking statements do not reflect the potential impact of any non-recurring or other unusual items or of any dispositions, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after the date of this news release. The financial impact of these transactions and non-recurring and other unusual items can be complex and depends on the facts particular to each of them. Finning therefore cannot describe the expected impact in a meaningful way or in the same way Finning presents known risks affecting its business.