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Report on Business Husky’s gas-station chain expected to attract strong buyer interest

Calgary-based Husky said on Tuesday it had hired advisers to help it evaluate selling the downstream business, following similar moves by rival integrated oil companies.

Jeff McIntosh

Husky Energy Inc. is likely to find there’s strong buyer interest in its Canadian gas-station network from an industry whose ownership has shifted radically in recent years.

The assets that Husky is considering selling, including about 500 retail, card-lock and bulk-fuel outlets and a small refinery in Prince George, B.C., could fetch around $1-billion in proceeds, although analysts' estimates vary widely based on educated guesses on multiples of earnings before interest, taxes, depreciation and amortization.

Calgary-based Husky said on Tuesday it had hired advisers to help it evaluate selling the downstream business, following similar moves by rival integrated oil companies. Husky was founded as a refiner in Cody, Wyo., in 1938. Today it is majority-owned by companies controlled by the family of Hong Kong billionaire Li Ka-shing. It said the move would improve its focus on its other assets in Canadian heavy oil and offshore exploration, U.S. Midwest refining and oil and gas production in the Asia-Pacific region.

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Buyers of other Canadian retail fuel businesses have included Parkland Fuel Corp., Alimentation Couche-Tard Inc. and 7-Eleven Canada Inc., all of which are likely to have a look at Husky’s assets. Brookfield Business Partners LP snapped up Loblaw Cos. Ltd.'s more than 200 retail gas stations and convenience kiosks for $540-million in 2017. Such deals have allowed major oil companies to cash out of their marketing arms while maintaining presence for their well-known brands across the country.

The Husky gas stations are largely concentrated in Western Canada, but extend as far east as New Brunswick.

Parkland is a possible bidder, RBC Dominion Securities speculated. It has previously acquired retail networks from Imperial Oil Ltd. and Chevron Corp. The bank estimated Husky’s retail assets to be worth $600-million to $750-million and the refinery, with a capacity of 12,000 barrels a day, to be worth $225-million to $315-million.

However, possible snags for any deal include competition concerns, given Parkland’s already large retail footprint, and the company’s elevated debt-load following its acquisition of a majority stake in SOL Investments Ltd. The $1.57-billion deal, which closed on Tuesday, expanded Parkland’s operations into the Caribbean. Parkland spokesman Leroy McKinnon declined to say if the company might be interested in the Husky assets.

Couche-Tard, whose brands include Mac’s and Circle K as well as its eponymous banner, bought Imperial Oil sites in Ontario and Quebec in 2016. The company, which operates internationally, is likely to be interested in the retail gas stations, given past acquisitions, Desjardins Securities said. However, it sees itself as a convenience-store operator, so bulk fuel and refining are not likely on its wish list, Desjardins said.

Couche-Tard spokeswoman Andréanne Jeanrie declined to comment. Officials from 7-Eleven did not return a request to comment on the Dallas-based convenience store chain’s potential interest.

Among other estimates of proceeds for Husky, Macquarie Capital Markets Canada Ltd. pegged the value of the refinery at $120-million to $150-million and the fuel outlets at $525-million to $600-million. Michael Dunn, analyst at GMP FirstEnergy, said the assets could fetch $800-million to $1-billion. Canaccord Genuity’s Dennis Fong put a value of $920-million to $1.5-billion on the overall business.

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Husky said its decision to consider selling its Canadian fuel assets is unrelated to the company’s $3.3-billion unsolicited takeover bid for oil sands producer MEG Energy Corp. That offer is to expire next week. Husky has not put a deadline on its study into selling its gas stations.

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