PARKLAND ACQUIRES JOY PROPANE

Propane Canada, Jul/Aug 2007

Just a few months after celebrating his company's 40th anniversary, Ron Graham of Joy Propane Ltd., a significant player in the northern British Columbia and northern Alberta propane supply business, sold Joy to Red Deer-headquartered Parkland Income Fund for $16.3 million. Earlier this year, Parkland finalized a deal for Neufeld Petroleum and Propane Ltd. and Neufeld Holdings Ltd. for $135 million.

Headquartered in Dawson Creek, B.C. and an employer of 50 people, Joy operates its propane supply business from six branches in Dawson Creek (two), Fort St. John, Chetwynd and Tumbler Ridge, B.C., and Fairview, Alberta. "This offers minimum overlap with the Neufeld business and fills in complementary market areas. Management expects to achieve synergies in logistics, branch operations and administration," says Parkland. "During the prior fiscal year annual sales exceeded 20 million litres of propane and sales revenues exceeded $12 million. The business serves customers in the oil and gas, forestry, agricultural, residential and auto sectors."

"The acquisition of Joy is exciting as it both fills gaps in our new commercial and industrial network and demonstrates the growth opportunity that we expected when we announced the acquisition of the Neufeld companies of Grande Prairie, Alberta," explains Parkland President and Chief Executive Officer Mike Chorlton.

Mr. Graham, who joined his father at Joy in 1970 and ran the business since 1981 (see sidebar story), says Parkland's offer was the best, sweetened by the fact it is a income trust and some of Joy's shares were converted to Parkland shares thereby postponing some capital gains.

Now that Parkland has two propane companies it is merging the accounting processes.

Headquartered in Grande Prairie, Alberta, Neufeld was privately held, operating in 13 locations in northern Alberta, northeast British Columbia and the Northwest Territories. Neufeld was primarily engaged in the distribution of fuel, propane, agricultural inputs (fertilizers, farm chemicals, etc.) and industrial products (lubricants, frac oils, etc.) to commercial customers in its service areas. Neufeld also serviced residential customers for home heating needs.

Neufeld, established in 1971, had a very strong reputation in the markets it served with a diversified customer base, servicing more than 6,600 customers with no single customer representing over 1% of sales.

"The acquisition of Neufeld is financially accretive to Parkland and will provide an attractive strategic platform on which to pursue additional growth opportunities in non-urban markets in Western Canada," Mr. Chorlton said in early 2007.

Neufeld President and CEO Abe Neufeld has joined Parkland as a Vice President, allowing Parkland to seamlessly bridge the relationships Neufeld has developed with its customer base. "This is a very exciting and positive transaction for all concerned," says Mr. Neufeld. "I am committed to Parkland and believe that the combined business will be able to capitalize on organic growth and acquisition opportunities over the next several years. Our employees will be joining a larger, publicly traded organization with extensive operations in Western Canada."

Parkland Income Fund, which trades on the Toronto Stock Exchange under the symbol PKI.UN, operates retail and wholesale fuels and convenience store businesses under its Fas Gas Plus, Fas Gas, Race Trac Fuels and Short Stop Food Stores brands and through independent branded dealers, and transports fuel through its Petrohaul division. With more than 550 locations, Parkland has developed a strong market niche in Western and Northern Canadian non-urban markets.

To maximize value for its unitholders, the Fund is focused on the continuous refinement of its retail portfolio, increased revenue diversification through growth in non-fuel revenues and active supply chain management. Parkland maintains ownership of the Bowden refinery near Red Deer, and has recently reactivated the site for production of drilling fluids.