Good morning, ladies and gentlemen, and welcome to this conference call held by Russel Metals. Today's call will be hosted by Martin Juravsky, Executive Vice President and Chief Financial Officer, and John Reid, President and CEO. Today's presentation will be followed by a question-and-answer period. At that time, if you have a question, please press star one on your telephone keypad. I'll now turn the call over to Marty. Please go ahead.
Great. Thank you, operator, and good morning, everyone. Thank you for joining this discussion on short notice, but we just finalized the purchase agreement with Samuel over the weekend. After I go through some introductory comments, John and I will open the floor to questions. If you want to follow along with the introductory comments, we have the information package posted on the front page of our website, and there is a link to this presentation that you can just click on from the homepage. If you go to page two, you can read our cautionary statement on forward-looking information. Let me start with an overview of the acquisition. First, we're really excited about this announcement.
We've talked extensively over the past two years about how active we've been in looking at acquisition opportunities, but we remain disciplined in focusing on businesses that are complementary from a geographic and product mix perspective, well-positioned from an asset quality and people perspective, and provide the opportunity to generate a greater than 15% return on capital over the cycle. This announced transaction lines up very well with these criteria. It's a great fit and will be immediately accretive to earnings as well as over the cycle. Second, we've had the opportunity to work closely with the team from Samuel over an extended period of time in structuring this transaction, and we are really pleased that we were able to come to an arrangement that works for all parties, including Russel and Samuel, but should also benefit our respective employees, customers, and suppliers.
In terms of the deal highlights on page 4, we'll be acquiring seven locations in total, with five being in Western Canada across Manitoba, Alberta, and BC, and two locations in New York State and Pennsylvania. We are acquiring all of their Western Canadian service center locations, other than one in Delta, BC, as Samuel will proceed with an orderly shutdown on that facility, and we'll be acquiring that location's inventory and equipment for relocation. The purchase price is eff ectively book value, the working capital at closing, CAD 29 million for the book value of the equipment, plus a CAD 10 million premium, and I'll talk more about that in a few minutes. From a key highlights perspective, the Western Canadian piece is a really nice fit as we have very complementary operations in the same geographies.
Both companies have value-added processing equipment, and the types of equipment mesh in very well with each other in each of the sub-regions. This will provide an opportunity to broaden the service offering to our customers. In addition, the acquisition will give us an opportunity to expand our non-ferrous footprint as Samuel has approximately 30% of its Western Canadian business being non-ferrous. This is a similar non-ferrous expansion to what we achieved with the Boyd acquisition in 2021. Their 2 U.S. Northeast locations provide an extension of our plate and plate processing operations in the U.S. From an asset perspective, we were really impressed during our due diligence trips with the quality of their people, as well as the extent and quality of the equipment.
If we were to acquire that amount of equipment to augment our existing operations, it would cost substantially more than the CAD 29 million that is associated with that part of the purchase price. We're also impressed with Samuel focus on safety, as safety is a really big deal for us. In fact, Russel was recently recognized by an industry association with an award for our safety culture. We feel very comfortable that there is a strong alignment from a safety culture perspective. In terms of deal logistics, it's subject to Competition Bureau clearance in Canada, and we expect to clear first half of 2024. I'll talk about our balance sheet in a minute, but the transaction will be financed from cash on hand, which stood at CAD 569 million at the end of September.
If we go to page five, I've included some financial metrics. The seven locations generated 2022 revenue of CAD 700 million in revenue and CAD 33 million of EBITDA. For the nine months of 2023, revenue was over CAD 450 million and EBITDA was CAD 19 million. If we put that in the context of Russel's 2022 results, the contribution from the acquisition, based upon historical numbers, is as follows: additional 14% to our revenues, additional 20% to our service center segment revenues, additional 23% on service center tonnage. In terms of EBITDA, excluding potential synergies, it would add around 6% to consolidated EBITDA and 9% to service center EBITDA.
One thing to note is that the historical EBITDA contribution is lower than the historical revenue contribution, as we found that Russel's relative profitability was significantly higher than that of the Samuel's operations. We think that because of the integration of the two businesses and our approach to business, there is a significant opportunity to substantially improve their relative performance. On page six, we have a map of the Western Canadian operations, as well as a picture of the types of equipment that are in the various Samuel's locations. It's really a cross-section of various coil and plate processing equipment, as well as the bottom right picture, that is some of their non-ferrous product mix. When we mesh their operations with our Western Canada footprint, there is a very interesting opportunity to reconfigure some of the locations to gain operating efficiencies and substantially reduce capital deployed.
On page 7, we show the two U.S. locations in Buffalo and Pittsburgh in blue, relative to our existing locations in red. The Samuel operations are plate and plate processing, which will extend our geographic footprint from Wisconsin into that Northeast corridor, and that region is very well positioned to benefit from increasing infrastructure spending. On page 8, I want to go through the buckets of the purchase price. The total of CAD 225 million is the net book value of the assets, plus a small ten million dollar premium. Over 80% of the purchase price is working capital, and CAD 29 million is the net book value of the fixed assets. As I said earlier, we believe that the book value of the fixed assets is less than the replacement cost.
Now, when we look at a typical M&A situation, we'll generally use cash flow multiples to assess value, and that approach will generally result in a meaningful premium to book value. In this situation, the underpinning of our valuation is the hard assets, with a very high percentage of the hard assets being liquid working capital. On page nine, I want to give a frame of reference on the implied multiples based upon historical stated results. As I said earlier, we think that their results can materially improve as part of the combined footprint, but equally important, we think there is an opportunity to pull a substantial amount of capital out of the combined business. This capital is in the form of excess working capital by more efficiently operating the combined footprint using our inventory management approach, but also potentially crystallizing value from real estate.
We have done this before, and our team is really good at it. If you look at the CAD 225 million estimated purchase price in the top row and the CAD 33 million of 2022 EBITDA column that is in the middle, it implies a 6.8x multiple. However, our objective is to gain both P&L benefits, but also move down the chart by reducing capital deployed. As an example, if CAD 50 million of capital were pulled out of the business, the implied multiple would be around 5.3x. We think the various business changes can be accomplished in a 1-2-year period. On page 10, we have our September 30 balance sheet. As discussed, we had net cash of CAD 272 million and available liquidity of almost CAD 1 billion.
Therefore, we'll continue to have a strong capital structure to not only complete this transaction, but also pursue other capital deployment opportunities that could make sense. Lastly, on page 11, I wanted to put a context around an update to the capital deployment changes that we've undertaken since early 2022—2020, through the end of September of this year, as we have substantially reconfigured the business profile and capital structure. On the left chart, we show that we've generated around CAD 1.5 billion of cash, through about CAD 1.1 billion from operating activities, plus over CAD 400 million from asset sales, which was mostly from the OCTG line pipe business sale, as well as CAD 35 million from the exercise of options.
On the right chart, we've included the initiatives that have been completed during the same period, and later in the impact from this acquisition announcement, as well as the Seven Stars acquisition that closed in early October. In total, the one point five billion dollars was deployed in approximately one third, one third, one third buckets. The first is in yellow and relates to our growth investments, including CAD 173 million of completed acquisitions, CAD 233 million for announced transactions, including this deal, and CAD 140 million for CapEx, as we have started to pick up the pace of the value-added reinvestments. The second one-third was returning capital to shareholders, as illustrated in blue, with CAD 93 million in share buybacks and CAD 358 million in dividends.
This was skewed to dividends over the extended period, but more recently has become balanced between the NCIB and dividends. In addition, about one third of the CAD 1.5 billion of capital deployed was to reduce debt and build up cash, which is illustrated in green, and has resulted in our capital structure being very strong to not only complete this deal, but also pursue other opportunities if they make sense. In closing, on behalf of John and myself, I'd like to extend our thanks to the team at Russel, who've worked very hard on the due diligence in structuring this transaction over an extended period of time, as well as the people at Samuel, with whom we've worked very closely. In addition, we look forward to welcoming the approximately 340 team members from Samuel into the Russel family.
In fact, John Reid and other, folks from Russel are spending today and the next few days meeting with the Samuel people across the seven locations. Operator, that concludes my intro remarks, and you can now open the line up for questions.
Thank you. If you wish to ask a question, please dial star one on your telephone keypad now to enter the queue. If you find your question has been answered before it's your turn to speak, you can dial star two to cancel. Our first question comes from the line of Michael Doumet at Scotiabank. Please go ahead. Your line is open.
... Hey, good morning, guys. Congratulations on this deal. Looks really attractive. I would say maybe just to start us off, Marty, just, you know, I think you talked about a little bit of the process on what the transaction looked like. But curious on, you know, whether you can talk about the rationale from the seller and maybe from Russel's standpoint, you know, why there was an interest to consolidate some of the assets in Western Canada.
Yeah. You know, it's easier to speak it from our perspective than perhaps Samuel's perspective, because every company makes their own decisions in terms of what they focus on, and they have a fairly diversified mix of businesses that do a whole variety of things. And we think we happen to operate the service center business pretty well. So it was a very natural discussion for them, looking at where they focus in different areas, and this being a core business for us. So for us, it was really a function of, you know, the conversations evolved to where there is really strong fit between the locations and the products that they have in certain areas and what we do, and that's where it really gravitated to in Western Canada. You know, we have a breadth of business in those locations.
They have a breadth of business in those locations.A nd it was really as we, you know, peeled layers of the onion away, it just became more and more apparent as we went through it. It's just not the theory of us operating assets in similar locations, it's really how those businesses could be integrated together in a much more efficient manner. And that's the thing that got us excited as we went through the process, and that's on the Western Canadian side of it. And then, similar but slightly different story on the two facilities in the U.S. Northeast. They were on a bit of an island for Samuel's, and for us, it is just a natural geographic extension of what we already have in Wisconsin.
Our Wisconsin operations have a really nice plate business, and that whole industrial rust belt of the Midwest and the Northeast is really important when it comes to all the infrastructure spending that is starting to come. And so for us, being able to extend that footprint of what we do well in Wisconsin further east, it's just... It, it was just a natural fit for us.
That makes a ton of sense. And at 1.05 price to book, I'd say the transaction looks quite appealing or quite attractive from your perspective. Just trying to maybe understand, I guess, the two other parts, just, you know, how much cost would you expect to incur to fully integrate these assets? And I guess the second part, you commented on this before, the difference between the book value and the replacement value. I'm not sure if that's primarily the land.
So on the last question first, there's no real estate coming over as part of the transaction. So all the locations, they're under leases. So when I'm talking about the replacement cost being in excess of the book value, that's for the equipment that were related to the operations. In my reference to monetization of excess real estate, some of that is within our existing portfolio of properties that Russel owns today. So when we think about combining the footprints together, there are situations where we might have some redundant real estate, and we could blend some of our operations into their location, so it kind of cuts both ways. So that was part of it on the freeing up some capital. Some of it is the real estate that we currently hold today. Your other question...
Sorry, what was the first part of your question again, Michael?
Just in terms of that cost for integration.
Yeah. There, there will be some of that over the course of the next year and two years. I suspect, you know, as part of the plan to get at efficiencies, there will be some one-time costs that we will see probably through the latter part of 2024. Our focus on the front end is really gonna be getting the systems up and running, getting the businesses onto the same systems. And so some of those one-time costs that'll probably start to show up, I suspect, are gonna be in the latter part of 2024.
Perfect. Those are my two. Thanks.
Thanks, Michael. Appreciate it.
Thank you. Our next question comes from the line of Ian Gillies at Stifel. Please go ahead. Your line is open.
Morning, everyone.
Hey.
Marty, with respect, you mentioned offhand reducing the invested capital from CAD 225 million to CAD 175 million in your prepared remarks. Is CAD 50 million a reasonable number to remove, move? Is there, like, any sort of range you could provide us just to help us, I guess, better understand what you think you could actually pull out of the business?
Yeah. I think that matrix is provided as a range to provide some of that direction. CAD 50 million? Yeah. I think we would be disappointed if that's all that came out.
Okay. And then with respect to the metal service centers and the gross margins, obviously, for a period of time, this business is going to be weaker than your existing business. But over the course of time, maybe it's the 2-year timeframe mentioned in the press release, maybe it's a bit longer, but is there any reason to think why you couldn't get the Samuel business back to that, call it 21 or 21, 22% gross margin number that you, you've often talked about of where you'd like that business to be?
You know, Ian, it's John. It's a good question, and we're really excited and think that is a very good opportunity to get back to what's more comparable to the Russel margins. And you've got additional value added capacity that we don't have, that they have today in Western Canada. We don't do slitting. They cut to length. That's some wider opportunities for us that will dovetail nicely with our existing value add. So those will work really hand in glove to do that. Again, the additional footprint and geography that we, that Marty talked about that we'll be adding in the Northeast, we think that will bring some of the potential synergies through what we do in the value-added process, and that may, they may not currently be doing.
We'll turn the inventory faster than they turn it, based on our ERP systems, as that's implemented, some operational efficiencies that will be there, and then some new equipment that will allow them to grow that margin as well along the value-added lines.
Okay, that's helpful. Thanks, John. Maybe last one for me. The timeline to close was a bit longer than I thought, would have thought it would be in otherwise. You mentioned the Competition Bureau. In these markets, can you maybe talk about what the competitive situation is gonna look like and how that Competition Bureau piece may play out, or if at all? I just don't know if that's boilerplate language or if there's something more or you'd like to discuss.
No, it's actually two points. One, yes, it is fairly boilerplate language, but in terms of the timing, your observation is correct, in terms of the timeline. But it's less about the competition clearance, which we think should be straightforward. But it's really a case of getting the transitional planning done properly. You know, one of the things when you carve out businesses' assets from another company, there's all kinds of back office stuff that needs to be done, IT systems, finance, personnel, and they run a fairly centralized business. We run a fairly decentralized business. So part of that timeline is really to make sure that we get that transition planning done right, so we can hit the ground running on closing.
Normally, if we just bought a company with systems intact, and you just buy it for what it is, you hit the ground running pretty quickly. But because of the carve-out from their existing businesses, and again, as I said, some of their stuff is centralized services, and so to be able to put that onto our system, we're gonna have to have some transitional efforts in place. That's really driven the timeline from, you know, we'll get the Competition Bureau clearance, and then there'll be a little bit of a buffer after that to make sure that we got those transitional services in place, before we get to closing.
Got it. Sorry, I'm monopolizing, but one last question. With respect to CapEx, I mean, you talked about existing assets. You're adding new facilities. I know there had been an upgrade program going on with respect to real estate. So that CAD 50 million a year CapEx that we had probably all been thinking about, does that number change, or do you wanna, or is there any updated commentary there on how much you expect spending to be?
No, not at all. Ian, that's continuing on as posted. As a matter of fact, probably in Q4 of this year, you'll see that number tick up a little bit because some of the projects that we had underway and we were thinking about doing, and we had planned for this year, you never know the exact timing, but some of those are starting to come to fruition in Q4. We are on track with our, our other initiatives on the capital expenditure front.
Okay, thanks very much. I'll turn it back over.
Thanks, Ian.
Thank you. Our next question comes from the line of Michael Tupholme at TD. Please go ahead. Your line is open.
Thank you. Good morning.
Hey, Mike.
First one, just, it's probably just a clarification, but in the press release where you talk about the 2022 financial metrics and then the nine-month metrics for the first 9 months of 2023, the decline in the business, is that entirely price driven?
Yeah, it's market conditions driven, and I think also they probably, in running their business during some of the market volatility of 2023, I mean, to be candid, they didn't run it as well as we did. And so some of the decisions perhaps they made on inventory at various points in time where there was some volatility, if we were running the business in 2023 under the same set of circumstances, regardless of synergies, regardless of integration, we probably would have done a better job on it and would have had a higher number.
Okay. And then you touched on this, but can you speak a little bit about a little bit more about the mix with the non-ferrous component? I think you made a reference to some similarities to the Boyd acquisition. But how does the mix here compare to Russel's service centers mix? And I don't know if that's the right way to think about it. Maybe we should be looking sort of more recently, but just trying to get a sense for how it actually compares to your overall mix.
Yeah, Michael, good question, and when we look at it, again, in Western Canada, predominantly on the non-ferrous that you're referring to, again, they've got a unique mix. They do some unique things out there that we don't do. So it'll be new product lines that we'll be adding, extrusions, those type of things that are out there. So the two will actually blend together very nicely. We do some things that they don't do, so it's gonna afford us the opportunity to really grow that very quickly in that marketplace. So again, we don't see there being a lot of overlap in product at all in the non-ferrous. It's again, they're more two independent operations of each other right now, and so we compete very little in that area.
We think it'll allow us to grow very quickly, something that would have been a, you know, 5-7 years slog if we had to go through that on our own.
Okay. And does that mix, difference in mix lead to any, differences in margins, even if, even if sort of you're running this under the Russel model and, and, and there's an improvement in margins? At the end of the day, does the mix factor into where the margins can get to, or that's not really relevant then?
... And I'd say it's such a bigger piece for us that's out there that we don't currently have, that typically runs at a higher gross margin than carbon. And so, yeah, it will factor in as we start to integrate there. So we think it'll give us a lift. When you put in the typical Russel gross margins on the existing business of carbon, then you add the non-ferrous piece that we don't do, that they have, we think that'll give us a further margin lift as well.
Okay. Marty, you mentioned all the facilities are leased, so what would be the lease liabilities that we'll see come onto the balance sheet once you close?
Yeah, there's the lease obligations in terms of the cash component will be a CAD 3-4 million per year. So you just capitalize that, and you'll see that the lease liability will go up by a little bit compared to what we have.
Okay. And then on the slide that runs through the various scenarios, for implied purchase price multiple, you've already talked a little bit about the capital. I guess, one clarification there. The decline, potential decline in net invested capital, is that inclusive of the real estate benefits you think you can realize here, or is this just on inventory management?
Well, when we're talking about the improvement, it's, it's both. So from a capital deployment perspective, we think that there's substantial improvement on both of those buckets.
Okay. But the bottom end of this range, for example, the CAD 125, would, you know, and I guess all these other potential levels of net invested capital, contemplate improvements on both fronts. It's not just one or the other.
Exactly. That's a good way to say it, Mike.
Okay. And then, just as, again, same slide nine, the annual EBITDA scenarios that are presented here. Can you give a bit of context for what these contemplate? Like you mentioned, I think in your prepared remarks, sort of the midpoint, CAD 33 million. Is that assuming the margins come up to sort of Russel's level and a similar level of revenue to what the business is doing now? Or what are the parameters here, for example, at that midpoint, just to get a sense?
No, actually, Mike, the way this is presented is it's not meant to be a forward-looking perspective. It's meant to take the CAD 33 million was what they generated in 2022, and then just showing some sensitivity around it. If you look at 2023 year to date, their number on an annualized basis is, you know, well, it's CAD 19 million through 9 months, and then you annualize that, and you get something into the low to mid-20s. So the purposes of page 9, it was really just to say 33 was the number that was there in 2022. Here's some sensitivities up or down on that.
It goes up in the context of improvements that we can bring to the table, but there is always a market cycle attached to it, which is why it was illustrated as a sensitivity table.
Okay, got it. Okay, I will leave it there. Thank you.
Thanks, Mike.
Thank you. Our next question comes from the line of Jonathan Lamers at Laurentian Bank Securities. Please go ahead. Your line is open.
Good morning. Thank you.
Hey, John.
Good presentation. Most of my questions were covered here. But just to clarify, Marty, on the sensitivity table again and the CAD 50 million-CAD 100 million of invested capital that you think could be released, is that, is that purely from the working capital and being run more efficiently on the inventory side? Or does that also include some release of real estate that you mentioned from your existing operations?
Yeah, it's both. So as we move further down the table, some of the easier hits are on working capital, and the bigger hits or the lumpier hits, as you work down the table, will include real estate as well.
Okay, thanks. And just on the strategic benefits from the acquisition, one thing that I wasn't quite clear on: Is there an opportunity for Russel's existing centers in Western Canada to also benefit from the focus on non-ferrous products from the Samuel centers? Is there an opportunity to bring more of those products into your existing operations?
Hey, Jonathan, it's John. Yeah. Oh, absolutely. And so I think that that's gonna help us broaden our product mix. And so again, they're bringing in new products, areas that we're not into today, and we can spread that across Western Canada pretty quickly because we already have established facilities and capabilities to handle those products. So it's just a matter of buying more of it and making sure that what the user needs are in the marketplace. We see that as a really strong opportunity.
Okay, thanks. I'm not sure if you want to comment on this or not, but just on the margin for these centers, being where they are relative to Russel's existing metal service centers, is the delta there really, you know, just a reflection of Russel's operating culture? Or is there anything else structurally about these centers that would explain the lower margin versus your existing operations?
I think Marty touched on it a little earlier in the call. We, we run the businesses very differently. You know, inventory turns are something that we, we'd be stronger at, based on our ERP system. It gives us an operating advantage as well in our ERP system with the automation. I think those things will be pretty, you know, pretty, quickly integrated in within the first year. When we look at those, again, we will be able to build off of our additional value-added capacities that we have by adding these. We'll just broaden that, so those come with a higher margin as well. So those things collectively will allow us to, to move that more to the, Russel level pretty quickly.
Jonathan, just to supplement what John said, one of the things that was interesting as we went through this process is, you know, normally you go, you're talking to people in the first layers, you get some financial information, you get the financial information, you're going: "Okay, the margins aren't quite what they should be. They're not quite what we're generating. Why is that?" Then we got to see the facilities, and we just thought that there was a disconnect between the quality of their facilities, the quality of their equipment, the quality of their people, and the financial results that were generated. So we just looked at that as opportunity and upside, as John said, if we could layer on our approach with what they already have in place, because it is a high quality asset base that they have.
There is a lot of equipment that is in place. There is a good team that is in place. With the focus and the drive and the approach that we have, we think we can bridge that gap.
Thanks for your comments.
Great. Thanks, Jonathan.
Thank you. Our next question comes from the line of Qasim Naqvi of National Bank Financial. Please go ahead. Your line is open.
Yeah, good morning, gentlemen.
Good morning.
Good morning.
I'm just calling in for Max. I was just wondering about the customer and market profile for the acquired centers. I'm assuming since it's Western Canada, it could be oil and gas producers, but I was wondering if there is any OEM exposure now, given Samuel's historic end market exposure.
Yeah, there will be some OEM exposure. We have some now, and so again, there's obviously with Western Canada, oil and gas is part of the marketplace that's out there, so we'll continue to be strong in those areas. But there definitely is more OEM exposure that's out there, and so something that we opportunistically can build on and bring the additional value-added services that Russel already shares to that market.
Great. Thank you. That's it for me.
Great. Thank you.
Thank you. Our next question comes from the line of Sean Jack at Raymond James. Please go ahead. Your line is open.
Hey, good morning, guys. So just high level curious, is the transaction accretive on an EPS basis? And if not, how do you guys see that progressing forward, and when do you think that would hit?
The short answer is, it is accretive on an EPS basis immediately, and as we start doing the initiatives related to operational improvement and pulling capital out of the business, that only gets enhanced. But yes, it is accretive coming out of the gates.
Okay, perfect. Yeah, I think all my other questions were actually answered, so perfect. I'll leave it there.
Great. Thanks.
Thank you. We currently have one further question in the queue, and it's a follow-up from Michael Tupholme of TD. Please go ahead. Your line is open.
Thanks. Just the improvements you're intending to make both from a margin perspective and then also in terms of reducing the invested capital in this business. I think you mentioned you think those play out over sort of a 1-2-year period, and I gather that's 1-2 years post-closing. Can you just confirm? And then the benefits you expect to realize on both of those fronts, does one happen more quickly than the other? Just you know, or is it sort of uniform over that period of time? Just trying to get a sense for which levers can be pulled, you know, first and fastest.
Yeah, Mike, it's a good question. So first off, it is post-closing, 'cause there's not a lot of stuff that we can do other than transitional planning before closing. I think you're gonna see it, you know, not symmetrical in the sense of one comes first and the other comes next. You know, things like real estate tends to be lumpy, and some of that's probably in the year two versus the year one. Some of the operational improvements, there's probably some efficiency gains that we're gonna get in different phases during year one, but there'll also be some one-time costs during year one as well. Bringing the two systems together is a big focus for us. The IT systems is a big deal.
And when we can start doing that, the inventory sharing makes is gonna be an awful lot easier. So to answer your question, it's not symmetrical of what comes first or what comes second, and some of it's also gonna be layered on by location. Certain locations are gonna be much easier to integrate than others. So I wouldn't necessarily put a hardwire, it's A, B, C, D, E, in a very linear fashion, and it's that same linear fashion across each location, across each business unit. But I think it's fair to say at a very, very high level, you know, the first six months is probably gonna be a lot of integration planning. The next six months is where you're gonna start to see some results, but also some one-time costs.
It's the second year where we're gonna really see the dial mover impacts.
Perfect. And then, sorry, I, I just... 'cause it relates to what we were just talking about here, and I know you were asked about this earlier, but on the subject of sort of integration costs or restructuring costs, I mean, I know you commented on this earlier, but I don't know if you gave a number. Is there any way to sort of help us understand the order of magnitude there?
I didn't give a number. You are correct. That's very astute, Mike.
Just trying to go through my notes while you were, but yeah, anyway, sorry, carry on.
Yeah. Let's put it this way: I think when they start to show up, the benefits will more than outweigh them, even though they do come in lumpy. But my suspicion is it'll probably be somewhere in the order of magnitude of perhaps CAD 5 million-CAD 7 million of one-time costs that'll be kicking in.
Okay, and that's, and that's sort of over that second six month, sort of second half of the first year. Is that, is that-
Correct. Correct.
Okay. Thank you.
Thanks, Mike.
Thank you. As there are currently no further questions in the queue, I'll hand the floor back to our speakers for the closing comments.
Great. Thanks, operator, and again, much appreciated to everyone tying in on very short notice. Obviously, these things come together, and we just wanted to make sure we can assemble this group and get as much information as possible out there. So again, we very much appreciate you tying in on short notice. As John and I talked about earlier, this is really exciting for us. We've been working on this and other situations, but this one in particular for a very long time, and we couldn't be more excited about the opportunities that are in front of us as we start, you know, pulling away layers of the onion and we get to closing and we get to the period post-closing. We think it's just a terrific fit between the two companies. So again, thank you for joining the call.
If you have any follow-up questions, please feel free to reach out, otherwise, we look forward to staying in touch.
Thank you. This now concludes the conference. Thank you all very much for attending. You may now disconnect.