Superior propane diversifies with chemical company acquisition

Propane Canada, Nov/Dec 2002

In order to grow and diversify, Superior Propane Inc. is buying the Canadian pulp chemicals business of U.S.-based Sterling Chemicals Inc. for $590 million. With this acquisition, the Superior Propane Income Fund, which owns the Calgary-headquartered propane distributor, cash distributions are expected to increase 10% in 2003.

"Our strategy for some time has been to expand the businesses of the Superior Propane Income Fund and to provide another platform for growth in 2003 and beyond," said Chairman Grant Billing in a November 14 conference call with analysts. "This acquisition meets all the requirements that we've set out over time for our criteria and objectives."

The U.S. Bankruptcy Court, which is overseeing Sterling's restructuring under bankruptcy protection, endorsed the deal on November 20. Sterling's bankruptcy was the result of problems in the U.S. company's petrochemical operations and unrelated to the pulp chemicals business, according to Mr. Billing. Sterling filed for creditor protection in June 2001.

Sterling produces and markets pulp chemicals and provides large-scale generators to the pulp and paper industry. It is one of the world's largest producers of sodium chlorate, which makes chlorine dioxide, used primarily to bleach wood pulp for high-quality paper.

Annual revenues have averaged about $228 million (U.S.) over the past three years, while earnings before interest, taxes and depreciation averaged $68 million (U.S.).

With headquarters in Toronto, the Sterling pulp chemical business has about 400 employees. The business operates plants in Vancouver, B.C.; Grande Prairie, Alberta; Saskatoon, Saskatchewan; Thunder Bay, Ontario; Buckingham, Quebec; and Valdosta, Georgia.

"The pulp chemicals business has a demonstrated history of strong financial performance and offers an excellent opportunity to further grow distributions for our unitholders over time, as we expand the business and improve its efficiency and productivity."

The management team of Sterling's pulp chemical business won't be integrated with the management of Superior Propane Inc.

Meanwhile, the Federal Court of Appeal is scheduled to hear again soon why the Competition Bureau is attempting to block the $175-million sale of ICG Propane to Superior. This three-year battle is still ongoing even though ICG is already fully integrated into Superior.