Parkland to Acquire Chevron Canada's Downstream Fuel Business

CALGARY, ALBERTA--(Marketwired - April 18, 2017) -

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES

(All financial figures are approximate and in Canadian dollars unless otherwise noted)

Parkland Fuel Corporation ("Parkland") (TSX:PKI) announced today that it has entered into an agreement with Chevron Canada Limited ("CCL") to acquire all of the shares of Chevron Canada R&M ULC, which operates its Canadian integrated downstream fuel business (the "Acquisition").

The Acquisition places important British Columbia infrastructure under experienced Canadian ownership. The business acquired as part of the Acquisition (collectively, the "Acquired Business") consists of: i) 129 Chevron-branded retail service stations principally located in Metro Vancouver, which complement Parkland's existing 44 Chevron-branded sites in British Columbia (the "Retail Business"), ii) 37 commercial cardlock and three marine fueling locations (the "Commercial Business"), iii) a complimentary refinery in Burnaby, terminals located in Burnaby, Hatch Point, and Port Hardy, British Columbia, and a wholesale business which includes aviation fuel sales to the Vancouver International Airport (collectively, the "Supply and Wholesale Business").

Subject to satisfaction of customary closing conditions, Parkland will pay approximately $1,460 million (US$1,100 million), plus an estimated $186 million in working capital for the Acquired Business.

"This accretive acquisition further strengthens our supply-focused business model and adds significant scale with the premier Chevron retail brand and network in British Columbia," said Bob Espey, President and Chief Executive Officer of Parkland. "Parkland is acquiring a highly integrated business which adds significant supply infrastructure and logistics capability to support Parkland's existing operations. The refinery in Burnaby is an important asset to Metro Vancouver and British Columbia and we will continue to operate it with the capable and experienced professionals who manage the refinery today. We look forward to welcoming the Chevron team to our company, and to deepening our relationships in British Columbia."

Acquisition Highlights

Strategic Rationale for the Acquisition

• Acquires British Columbia's premier fuel marketing business and will be the exclusive distributor of Chevron-branded fuels;
• Adds more than 2.5 billion litres of annual volume and $230 million in estimated Normalized EBITDA excluding expected synergies;
• Acquires key supply infrastructure (three terminals and a high value refinery with pipeline access) to significantly enhance Parkland's supply advantage;
• Secures Parkland's position as Canada's largest fuel retailer by site count supplying over 1,800 service stations;
• Develops Parkland's marine logistics capability in a strategically attractive Vancouver-area waterfront location; and
• The Acquisition, along with the previously announced asset purchase agreement with Alimentation Couche-Tard Inc. to acquire the majority of the Canadian business and assets of CST Brands, Inc. (the "CST Acquisition") which is expected to close in the second quarter of 2017, provide Parkland with significant opportunity for synergies.

Retail and Commercial Businesses

• Acquires 129 Chevron branded retail service stations, adding 950 million litres in incremental annual retail fuel volume and strengthening its position as the largest fuel retailer by site count and the second largest convenience store operator in Canada pro forma the CST and CCL acquisitions;
• Adds high quality company-owned retail footprint in Metro Vancouver that complements Parkland's existing 44 Chevron-branded retail sites in British Columbia; and
• Acquires 37 commercial cardlock sites in British Columbia and Alberta, and three marine fueling stations in Vancouver, adding 370 million litres in new Commercial volume and complementing the Ultramar branded cardlock network in Eastern Canada once the CST Acquisition closes.

Supply and Wholesale Business

• Acquires a 55 thousand barrel per day (3.7 billion litres per year) refinery in Burnaby that is highly integrated with the retail, commercial, and wholesale businesses, as 85% of the refinery's production is sold through the acquired marketing assets;
• Acquires three terminal assets in Burnaby, Hatch Point and Port Hardy;
• Acquires a wholesale aviation business serving Vancouver International Airport ("YVR");
• Ideally located refinery to serve the British Columbia market as the largest of only two refineries in the province, and the only one in the Vancouver supply area;
• Provides exclusive source of Supreme Plus 94 octane gasoline sold throughout British Columbia; and
• Benefits from a track record of highly reliable operations under CCL's ownership.

Synergies and Accretion

• Total identified annual run-rate synergies of $35-$50 million, resulting in total estimated Normalized EBITDA of $265-$280 million including synergies;
• 30%+ accretion to 2016 distributable cash flow per share (pro-forma the CST Acquisition) on a run-rate, normalized basis; and
• Pro forma Net Debt to EBITDA of approximately 3.5x with a strong deleveraging profile; Parkland expects to reduce its leverage ratio to well within its previous guidance by 2019.

Other Transaction Details

• Parkland will invest in the retail operations and apply its expertise as a leading fuel marketer and convenience store operator to enhance the customer experience;
• Parkland intends to retain the key management personnel who possess the refining knowledge and expertise acquired as part of Chevron Canada's 85 year experience operating the refinery in Burnaby; and
• Parkland commits to continuing Chevron Canada's active role in community initiatives.

Acquisition Financing

The Acquisition and related fees and expenses will be financed with a fully underwritten financing package including:

• Approximately $660 million from a bought deal private placement of common shares in Parkland ("Shares");
• $268 million drawn on revolving credit facility and $500 million from a bridge facility, both of which have been fully underwritten by The Toronto-Dominion Bank and National Bank of Canada as Co-lead Arrangers and Joint Bookrunners; and
• $40 million of non-debt sources, the majority of which is expected to be cash flows from operations.

Parkland expects to replace the bridge facility with alternative longer term debt prior to the closing of the Acquisition. Furthermore, Parkland intends to enter into a working capital financing agreement with Merrill Lynch Commodities to finance the hydrocarbon inventory and receivables, which are estimated to be $258 million at the close of the Acquisition.

"The scale of the pro-forma business combined with the strong cash flow from operations and operational synergies expected from the Acquired Business will further strengthen Parkland's balance sheet and capital structure," said Mike McMillan, Chief Financial Officer. "The transaction financing structure we have put in place enables Parkland's pro forma leverage ratio to be approximately 3.5x and is expected to be reduced further in 2019."

In order to finance a portion of the Acquisition, Parkland has entered into an agreement with a syndicate of underwriters (the "Underwriters") bookrun by TD Securities Inc. and National Bank Financial Inc., to sell approximately 24 million Shares on a bought deal private placement basis. The Shares will be sold at a price of $27.70 per Share (the "Offering Price") for gross proceeds to Parkland of approximately $660 million (the "Offering").

The Shares will be offered by way of private placement exemptions to accredited investors in all provinces of Canada, and in the United States on a private placement basis pursuant to exemptions from the registration requirements of the United States Securities Act of 1933, as amended. The Shares will be subject to a four month hold period, under applicable securities laws in Canada. Closing of the Offering is expected to occur on or about May 9, 2017, subject to Toronto Stock Exchange and other necessary regulatory approvals.

The Acquisition is subject to the receipt of customary third-party consents and regulatory approvals, including approval from the Competition Bureau of Canada. Closing of the Acquisition is expected to be in the Q4 2017.

Update on CST Acquisition

Parkland expects to close the CST transaction in Q2 2017.

Investor Event and Conference Call Information

Parkland Fuel Corporation will host a webcast and conference call on 2:45 p.m. MT (4:45 p.m. ET) on April 18, 2017 to discuss the Acquisition. Parkland's Senior Leadership Team will be available to take questions from securities analysts, and investors following their formal comments.

Please log into the webcast slide presentation 10 minutes prior to start time at:

http://edge.media-server.com/m/p/9jdf3htp

To access the conference call by telephone, dial toll-free: 1 844-889-7784 (Conference ID: 10377960). Please connect approximately 10 minutes before the beginning of the call. The webcast will be available for replay one hour after the conference call ends. It will remain available at the link above for one year and will be posted to www.parkland.ca.

A link to the live webcast and investor presentation will be available on the Investors section of Parkland's website. http://www.parkland.ca/investors/.

If you are unable to participate in the call, a replay will be available by dialing 1 855-859-2056 (Conference ID: 10377960) (Canada and USA toll-free). For international callers, please dial 1 404-537-3406 (Conference ID: 10377960). A transcript of the broadcast will be posted on the website once it becomes available.

Advisors

BofA Merrill Lynch, TD Securities Inc. and National Bank Financial Inc. are serving as financial advisors to Parkland. McCarthy Tétrault LLP is serving as Parkland's legal advisor for the Acquisition and Bennett Jones LLP is serving as Parkland's legal advisor in respect of the Offering and competition matters relating to the Acquisition.

Forward-Looking Statements

Certain information included herein is forward-looking. Many of these forward looking statements can be identified by words such as "believe", "expects", "expected", "will", "intends", "projects", "projected", "anticipates", "estimates", "continues", "objective" or similar words and include, but are not limited to, statements regarding Parkland's expectation of its future financial position, business and growth strategies and objectives, sources of growth, capital expenditures, financial results, future financing and the terms thereof, future acquisitions and the efficiencies to be derived therefrom, Parkland's leverage pro forma the Acquisition, Normalized EBITDA (as defined herein) of the business acquired in the Acquisition, future projections of Normalized EBITDA, the contribution to EBITDA and/or Adjusted EBITDA and/or Normalized EBITDA from the Acquisition, the pro forma site counts, volumes, and gross margins expected to be derived from the Acquisition and, where applicable the CST Acquisition, and sources of financing for the Acquisition. Unless otherwise stated or the context dictates otherwise, the financial outlook and forward looking metrics contained in this press release are based on the following assumptions, as applicable, including but not limited to: (i) Parkland securing sufficient supply of crude oil, including sufficient access to linespace on the Trans Mountain pipeline; (ii) refining and marketing margins in Metro Vancouver, Vancouver Island, and the BC Interior remaining consistent with historic norms; (iii) conducting a planned shutdown and maintenance of the refinery located in Burnaby, B.C. ("Burnaby Refinery") in Q1 2018 ("2018 Turnaround"); (iv) maintaining the assets within the forecasted budget for capital expenditures, particularly those relating to the Burnaby Refinery; (v) operating the Burnaby Refinery with no unplanned extended outage; and (vi) operating the Burnaby Refinery at a utilization rate within historic norms including in respect of fluctuations of refining gross margins, and planned maintenance downtime and associated expenses.
Parkland believes the expectations reflected in such forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward looking statements should not be unduly relied upon. The forward-looking statements contained herein are based upon certain assumptions and factors including, without limitation: historical trends, current and future economic and financial conditions, and expected future developments. Parkland believes such assumptions and factors are reasonably accurate at the time of preparing this press release. However, forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties some of which are described in Parkland's annual information form and other continuous disclosure documents. Such forward-looking statements necessarily involve known and unknown risks and uncertainties and other factors, which may cause Parkland's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward looking statements.
Such factors include, but are not limited to, risks associated with: the failure to achieve the anticipated benefits of acquisitions, including the Acquisition and/or the CST Acquisition; the operations of the Burnaby Refinery assets including compliance with all necessary regulations; competitive action by other companies; refining and marketing margins; the ability to cost-effectively secure sufficient supply of crude oil and other raw materials, including sufficient access to linespace on the Trans Mountain pipeline; the ability of suppliers to meet commitments; the ability to conduct the 2018 Turnaround as planned in Q1 2018; the ability of management to maintain the Acquired Business within the forecasted budget for capital expenditures, particularly those relating to the Burnaby Refinery; the ability to maintain productive relationships with the labour unions (Unifor and Teamsters) that represent the majority of the employees at the Burnaby Refinery; failure to obtain necessary regulatory or other third party consents and approvals required to complete the Acquisition and/or the CST Acquisition; failure to complete the Acquisition and/or the CST Acquisition, failure to complete the Offering, ability to secure alternative sources of funding to the bridge facility on terms acceptable to Parkland, failure to meet financial, operational and strategic objectives and plans; general economic, market and business conditions; industry capacity; failure to realized anticipated synergies from the CST Acquisition and or the Acquisition, the operations of Parkland's assets, competitive action by other companies; the ability of suppliers to meet commitments; actions by governmental authorities and other regulators including increases in taxes; changes and developments in environmental and other regulations; and other factors, many of which are beyond the control of Parkland.
There is a specific risk that Parkland may be unable to complete the Acquisition in the manner described in this press release or at all. If Parkland is unable to complete the Acquisition, there could be a material adverse impact on Parkland and on the value of its securities. Readers are directed to, and are encouraged to read, Parkland's management discussion and analysis for the year ended December 31, 2016 (the "MD&A"), including the disclosure contained under the heading "Risk Factors" therein. The MD&A is available by accessing Parkland's profile on SEDAR at www.sedar.com and such information is incorporated by reference herein.

Non-GAAP Financial Measures

This press release refers to certain financial measures that are not determined in accordance with International Financial Reporting Standards ("IFRS"). Adjusted EBITDA, Normalized EBITDA, Adjusted Gross Profit, Distributable Cash Flow, Distributable cash flow per share, Payout Ratio, Earnings Per Share, Normalized EBITDA, Senior Funded Debt and Total Funded Debt to Credit Facility EBITDA are not measures recognized under IFRS and do not have standardized meanings prescribed by IFRS. Other issuers may calculate these non-GAAP measures differently. Management considers these to be important supplemental measures of Parkland's performance and believes these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in its industries. See "Non-GAAP financial measures, reconciliations and advisories" section of the MD&A. Normalized EBITDA is management's estimate of the annualized five-year average EBITDA of the Acquired Business post-2018 Turnaround, based on the annualized average historical EBITDA of the Acquired Business from 2012-2016 and is subject to the material factors and assumptions noted above as well as management's assumptions regarding: i) crude oil costs and refined product pricing for the future period (refined product pricing is driven by refined product supply and demand in Metro Vancouver); and ii) expenses in connection with routine turnarounds which temporarily increase operating expenses and decreases throughput and revenue. Normalized EBITDA in respect of the Acquired Business has been determined in a manner consistent with the manner in which Parkland determines EBITDA for reporting purposes over the periods referred to. Investors are encouraged to evaluate each adjustment and the reasons Parkland considers it appropriate for supplemental analysis. Readers are cautioned, however, that these measures should not be construed as an alternative to net income determined in accordance with IFRS as an indication of Parkland's performance.
The financial measures that are not determined in accordance with IFRS in this press release are expressly qualified by this cautionary statement. Additionally, the estimated annual Adjusted EBITDA contribution from the Acquired Business and/or the business acquired in the CST Acquisition is based on the financial statements of CCL and CST respectively, which were prepared in accordance with United States (U.S.) generally accepted accounting principles (U.S. GAAP) and converted to Canadian dollars at averaged historical exchange rates on a quarterly basis. Additionally, readers are directed to, and encouraged to read, the 2017 Adjusted EBITDA Guidance Range section of Parkland's press release dated March 2, 2017 and material factors and assumptions contained therein. Parkland believes such Parkland believes its estimation of annual Adjusted EBITDA, Adjusted Gross Profit, and Distributable Cash Flow per share based on such information is reasonable and but no assurance can be given that these expectations will prove to be correct and such figures should not be unduly relied upon. Any forward-looking statements are made as of the date hereof and Parkland does not undertake any obligation, except as required under applicable law, to publicly update or revise such statements to reflect new information, subsequent or otherwise. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

About Parkland Fuel Corporation

Parkland Fuel Corporation is one of North America's largest marketers of fuel and petroleum products. We deliver gasoline, diesel, propane, lubricants, heating oil and other high-quality petroleum products to motorists, businesses, households and wholesale customers in Canada and in the United States. Our mission is to be the partner of choice for our customers and suppliers, and we do this by building lasting relationships through outstanding service, reliability, safety and professionalism.

We are unique in our ability to provide customers with dependable access to fuel and petroleum products, utilizing a portfolio of supply relationships, storage infrastructure, and third-party rail and highway carriers to rapidly respond to supply disruptions in order to protect our customers.

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