Private Capital at Work

How a PE Partnership Unlocked the Potential for Nova Scotia’s Bluewave Energy

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Photo courtesy: Birch Hill Equity Partners.

It was a CAD $214M purchase of privately held Bluewave Energy LP more than a decade ago that helped Parkland Corp. become the largest independent petroleum distributor in Canada. The acquisition was a springboard for Calgary-based Parkland to further expand across Canada and then into the United States, the Caribbean, and the Americas through its retail, commercial and wholesale channels.

As a division of Parkland, Nova Scotia-based Bluewave remains a leading Canadian petroleum distributor delivering fuel, propane, lubricants, and equipment to businesses, industries, and homeowners across Canada. Under the Parkland umbrella, Bluewave has greater access to supply and distribution, expanded delivery fleets, and a larger employee base to help support coast to coast.

Bluewave started in 1999 as Emera Fuels, the heating oil, and commercial fuel distribution arm of Nova Scotia Power, which is owned by Emera Inc. The management team built the Emera Fuels business through 11 acquisitions between 1999 and 2004. In 2005, members of the management team, alongside several private investors, decided to purchase Emera Fuels to form Bluewave.

The company’s plan was to continue expanding across the country with strategic acquisitions, according to Bill Sanford, Bluewave’s president, and CEO until 2011.

We started with a base business here in Nova Scotia and expanded rapidly from there,” he says.

In late 2006, Bluewave acquired Thermoshell, the heating oil and commercial diesel distribution assets of Shell Canada in the Maritimes and parts of Ontario. Sanford and his management team went to Bay Street to find a financier for the deal and came across private equity firm Birch Hill Equity Partners Management Inc. Toronto-based Birch Hill not only shared Bluewave’s vision for growth but was able to help the company complete the purchase within a tight deadline of just 30 to 45 days. The PE firm took a 75% stake in Bluewave as part of the transaction.

We really were the first group in the oil industry in Canada to get involved with private equity and take on a significant portion of the downstream part of the oil industry across Canada,” Sanford recalls. Up to that point, it was mostly big international companies and small independents.”

Based upon the successful transition of the Thermoshell business to Bluewave, Shell also decided to sell its similar Western Canadian distribution assets to Bluewave. The expansion continued in 2007 when Bluewave bought Shell Canada’s Northern Ontario and Western Canadian downstream commercial fuels distribution business.

It was Bluewave’s ability to successfully integrate and manage its growth that attracted Shell to the company once again. Bluewave then acquired Alberta North Petroleum in 2008 and Sawlor Fuels, the last remaining Shell-branded reseller in Nova Scotia in 2009.

They gave us the ability to shop across Canada and to take what we wanted,” Sanford says of Shell. We had a very broad and expansive business, with operations from Nova Scotia to B.C. and as far north as the Northwest Territories.”

Birch Hill’s investment helped Bluewave make a total of 16 acquisitions over three years that more than tripled the size of the company without the need for any additional equity investment. Between 2006 and 2009, Bluewave grew from 11 to 48 branches and doubled its employees to more than 400, while revenue increased from $99M to $670M and profit from $4M to $38M.

A Bluewave Energy Employee at Work. Courtesy: Birch Hill Equity Partners

But it was more than capital that Birch Hill brought to the table. Sanford says the PE firm also provided guidance on how to execute the deal-making and to scale the operations. We went from being just an operator to tremendous acquirers and integration specialists,” he says.

Birch Hill also helped Bluewave recruit key executives to the company as well as the discipline around its processes and procedures to help the company expand strategically.

After about three years, Bluewave and Birch Hill began looking for the next phase of growth and the company began looking at more M&A opportunities. In October 2009, after considering four significant acquisitions, the company struck a deal to be bought by Parkland for $214 million —almost quadrupling Birch Hill’s return on investment. The deal closed in January 2010.

Sanford said at the time the deal was announced that it would help Bluewave better serve its customers across the country. This acquisition brings together two really impressive teams and strengthens our collective financial position for continued growth,” he stated.

PE unleashes the potential in a lot of leadership teams, they allowed us to build our dream.”