TORONTO, ONTARIO- Superior Plus Corp. (“Superior”) (TSX:SPB) announced today it has entered into a definitive agreement to sell its Construction Products Distribution business (“CPD”) for total cash consideration of US$325 million (approximately Cdn. $420 million) to Foundation Building Materials, LLC (the “Transaction”). The Transaction is subject to customary purchase price adjustments, closing conditions and the receipt of required regulatory approvals and is expected to close in the second half of 2016. For further information regarding all terms and conditions contained in the definitive agreement, please see Superior’s material change report, which will be filed in connection with this Transaction.
Completion of the Transaction will allow Superior to reduce debt, increase its financial flexibility and enable Superior to redeploy capital to its Energy Distribution and Specialty Chemicals businesses. The divestiture of CPD simplifies Superior’s business model by exiting its most cyclical business.
The sale of CPD follows a strategic review process which commenced in early 2014. This review was subsequently terminated as management did not believe that prospective acquirers were offering a value reflective of CPD’s core business, attractive free cash flow and sizable growth opportunities. Following the termination of the initial strategic review process, Superior made significant efforts to increase the standalone value of CPD. These efforts included the implementation of a new management team, the initiation of various growth initiatives and the execution of other transformational initiatives including the replacement of two legacy ERP systems with a single, integrated system.
Luc Desjardins, President and Chief Executive Officer stated, “We are extremely pleased with the execution of this agreement with Foundation Building Materials. This transaction is transformative for our balance sheet and is the foundation for Evolution 2020 where we will focus on our Energy Distribution and Specialty Chemicals businesses. With a strong balance sheet we will pursue accretive acquisitions, expansions of existing footprints as well as organic growth while maintaining our continuing focus on best in class operations and customer service. Through patient execution of our strategy to create value for our shareholders, we have surfaced an attractive valuation for CPD. This reinforces my belief that we made the right decision in 2014. I would like to thank Mike Farrell, the senior management team, and all the employees of CPD for their dedicated service while part of the Superior Plus family.”
The proceeds from the sale of the CPD segment will initially be used to repay indebtedness under Superior’s credit facility. Assuming the Transaction is completed as anticipated, the proposed reduction of indebtedness under the credit facility is expected to lower Superior’s leverage ratio to a range of approximately 2.0 – 2.5X EBITDA (from 3.4X as at March 31, 2016), below the target range of 3.0 – 3.5X EBITDA. The Transaction will also initially result in a reduction of Superior’s adjusted operating cash flow (“AOCF”) from the date the sale is completed. Superior’s current corporate outlook, which does not include any effects of the Transaction, had assumed CPD would contribute AOCF of approximately $0.17 per share for the last six months of 2016.
BMO Capital Markets is acting as exclusive financial advisor to Superior and Orrick, Herrington & Sutcliffe LLP and Norton Rose Fulbright Canada LLP are acting as legal advisors to Superior in relation to the Transaction.