The US$1.21 billion purchase of a 75 per cent stake in the Barbadian SOL Group by a Canadian-based firm is being hailed by a consumer rights advocate as a welcomed injection of foreign exchange into the beleaguered economy.
It emerged this morning that SOL, which came close to buying the state oil importer, the Barbados National Terminal Company Limited (BNTCL), would initially give up 75 per cent of its operations in a deal with fuel and petroleum products marketer, Parkland Fuel Corporation.
The transaction and related fees and expenses will be financed by Parkland with a fully underwritten financing package, the companies announced in a joint statement.
The deal, which officials are hoping to close at the end of this year, should also see SOL acquiring approximately 9.9 per cent stake in Parkland, it added.
The transaction, the release said, was subject to “customary third-party consents and regulatory approvals, including approvals of the Toronto Stock Exchange”.
“The SOL brands will remain in place, and the SOL business will retain key management and continue to be managed from the Caribbean,” the release said.
The move would mean considerable sums of money for the struggling Barbados economy while at the same time “remove the pressure off those who wanted to buy BNTCL”, consumer rights advocate Malcolm Gibbs-Taitt told Barbados TODAY this afternoon.
“If there is a sale that will bring more monies to Barbados I am for it. I am not against that at all because our country lacks foreign exchange and that may very well assist in that effort,” said Gibbs-Taitt.
At the end of last November, the Fair Trading Commission (FTC) denied an application by the SOL Group to buy BNTCL in light of the terms of the agreement at the time, saying that it would only approve the transaction if certain issues were addressed.
SOL’s competitor, France-based RUBIS, had secured an interim injunction to stop the proposed US$100 million purchase of BNTCL, which was offered for sale by the Freundel Stuart administration in January 2017.
RUBIS had filed an application in the High Court for judicial review of a decision to approve the inclusion of a 15-year moratorium clause.
Since assuming office at the end of May, the Labour Party Government has thrown the sale of the BNTCL and the Hilton Barbados Resort, another state asset, into doubt.
The Parkland/SOL release, however, made no mention of the BNTCL development.
But officials said the Parkland/SOL deal creates the opportunity for Parkland to roll out its private label, loyalty programme and enhanced food offer.
Outlining a “strategic rationale” the company said the deal “adds significant scale to Parkland’s supply advantage and expertise; provides increased exposure to stable earnings across multiple lines of business; provides diversification from the North American market [and] significantly contributes to Parkland’s US dollar cash flows”.
It will also “support” acquisition and expansion opportunities in the Caribbean and the Americas.
While acknowledging that the company was keen on expanding in the Caribbean and other regions, Gibbs-Taitt raised questions as to whether the Caribbean would benefit from the company’s profits.
“The problem with people who own large companies is that their monopoly power allows them to fix prices that don’t necessarily suit consumers. So that is obviously going to be a factor. The other possibility is where the profit of the company will go. Will it remain in the Caribbean or will it head towards Canada? That, to me, is one of the questions that needs to be asked,” said Gibbs-Taitt.
“All I can see as a benefit to Barbados would be the foreign exchange that may be helpful to us, but the profits that the company will get from its business may not necessarily stay in Barbados. That is my concern,” he said, adding that the deal could result in stiffer competition in some aspects of the sector.
Parkland President and Chief Executive Officer Bob Espey said the addition of SOL to its portfolio would extend its global supply reach and enable the company to build its supply advantage to benefit its entire business.
“With its integrated supply chain backed by an extensive distribution network, fortress assets, a premier brand portfolio and an exceptional team, SOL has built a strong market position with unparalleled regional scale. Together, Parkland and SOL create a significant North American and Caribbean growth platform,” he said.
SOL supplies and markets a total of 4.8 billion litres of fuel volume annually across 23 countries in the Caribbean generating some US$215 million in adjustment earnings before taxes, depreciation and amortization in the 12-month period ending July 2018.
SOL’s founder, Sir Kyffin Simpson, said the deal would ensure “an exciting and dynamic future for everyone”.
“With a desire to continue to develop and grow the business through expansion in new areas, I am extremely blessed to bring in our good friends Parkland of Canada to the Caribbean,” he said.
SOL currently has earnings from 526 retail stations in the region, 266 of which are company-owned or leased sites and 260 dealer-owned and operated.
On the retail side, SOL currently operates 197 Shell-branded retail stations and 163 Esso-branded retail stations and 93 SOL stations in the region.
SOL’s infrastructure assets include 32 import terminals, seven pipelines, three marine berths and 10 charter ships.
On the commercial end, SOL represents approximately 1.8 billion litres of annual volume with operations in 21 countries. It supplies gasoline, diesel, fuel oil, LPG and other petroleum products to commercial and industrial customers across a range of sectors.
SOL is also involved in the aviation business in several countries, operating mostly through joint ventures with various third parties.
Explaining how the deal will be funded, the company said in the release “debt financing of approximately CA$1.1 billion underwritten by Canadian Imperial Bank of Commerce and National Bank of Canada as Co-Lead Arrangers and Bookrunners consisting of CA$470 million of senior secured bank debt, a US$250 million (approximately CA$325 million) term loan and a term facility of C$300 million”.
“SOL Limited will provide approximately CA$518 million of equity financing through its investment in Parkland”, it added.