Federated Co operatives Limited leaders discuss $264M Husky fuel sites acquisition

Federated Co-operatives Limited is making the largest retail purchase in its history.

It's spending $264 million to purchase 181 Husky retail fuel sites from Cenovus Energy Inc.

"This will allow local Co-ops to grow into new geographic areas and increase service offerings in their communities,'' FCL CEO Scott Banda said.

The deal is part of roughly $660 million in asset sales Cenovus announced on Tuesday. It's subject to regulatory review by the Competition Bureau of Canada, which may determine which sites stay in the deal.

Those that stay will be transferred over to local Co-ops, while others will remain with Husky branding for a short time while being supplied by FCL, Banda said.

The regulatory review for the purchase - which is FCL's largest in terms of money spent and number of sites - will likely conclude by the middle of 2022, he said.

In cases where Husky and Co-op locations are close to each other, it's possible that the regulatory review won't allow FCL to purchase both sites, FCL vice president of energy Brian Humphreys said.

The sites are a mixture of gas bars, on-site car washes and convenience stores; most are in Alberta and British Columbia, where the brand is less concentrated, FCL VP of finance Tony Van Burgsteden said.

Cash on FCL's balance sheet will finance the deal, he added.

The purchase goes back almost three years, to when Husky first announced that it was selling the assets.

The onset of COVID-19, followed by the Cenovus and Husky merger that finalized earlier this year, delayed matters until the assets came on the market again late this summer, Banda said.

"(There's been) pretty rapid negotiation from that point forward.''

The Regina Co-op refinery has enough capacity to cover expanded service, but it's unlikely it will hire for more positions there as it does so, he said.

The ethanol complex near Belle Plaine, Sask. will also supply the expanded network of Co-ops and independent suppliers.

In October, FCL announced plans to spend roughly $510 million on carbon capture technology in a bid to reach net-zero emissions by 2050.

Banda said the expanded network in the deal is part of that transition. "We probably have a decade as we move through the transition to ensure that we can continue to offer our members and the communities fuel services,'' he said.