Calgary-based Parkland Corp. owns more than 4,000 outlets, including the On the Run convenience store chain.Fred Lum/The Globe and Mail
The largest shareholder in Parkland Corp. plans to vote in favour of a proposed $7.7-billion takeover of the gas-station owner by Sunoco LP, a decision that effectively ends a lengthy battle over the company’s future.
Simpson Oil Ltd. said late Friday that it will endorse Sunoco’s SUN-N friendly offer for Calgary-based Parkland PKI-T, the owner of 4,000 gas stations and On the Run convenience stores, as well as a refinery in British Columbia, at a shareholder meeting scheduled for June 24.
Cayman Islands-based Simpson Oil owns a 19.8-per-cent stake in Parkland and recently spent months fighting to nominate a slate of directors to its board and name new leaders. The decision to support Sunoco’s bid comes after the Dallas-based company made an offer for Parkland in 2023 that the board turned down.
“A combination with Sunoco will allow Parkland to benefit from operating under a first-class management team with a proven track record of value creation,” Simpson Oil said in a news release. “This should address the lamentable governance and performance issues which have plagued Parkland for years.”
Simpson Oil’s decision to support the takeover, after a two-year fight with Parkland’s board, takes the drama out of the planned shareholder vote. Including debt, the takeover is worth US$9.1-billion.
Earlier Friday, New York-based hedge fund Engine Capital LP pushed Sunoco to boost its offer for Parkland. Engine Capital owns 2.5 per cent of Parkland and has been campaigning for the company’s sale.
In early May, Sunoco offered $44 per Parkland share – a combination of cash and its own shares – in a transaction that would create one of North America’s largest gas station and convenience store operators.
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Engine Capital said in a news release Friday that the Sunoco offer “materially undervalues Parkland.”
“To be clear, our opposition to this transaction is directed at its terms – not at Sunoco or its management team,” said Engine Capital managing partner Arnaud Ajdler and partner Brad Favreau. “We have great respect for both and would welcome the opportunity to become long-term investors in Sunoco if the transaction terms more accurately reflected Parkland’s intrinsic value.”
Parkland, Sunoco and Simpson Oil declined to comment on Engine Capital’s decision to oppose the takeover.
Sunoco’s bid for Parkland consists of $19.80 per share in cash and 0.295 of Sunoco units.
In 2023, it offered to buy Parkland for $18 per share and 0.443 Sunoco units, according to Engine Capital. Parkland’s board turned that bid down. The fund manager said that offer would now translate into a $50.70-per-share bid for Parkland.
“We believe the 2023 Sunoco proposal – while still undervaluing Parkland – would better reflect the intrinsic value of the company,” Engine Capital said.
Parkland and Sunoco structured the takeover with a wrinkle meant to allow the deal to close, even if Engine Capital and Simpson Oil voted against the transaction.
The acquisition is structured as a plan of arrangement, requiring approval from 66.6 per cent of votes cast by Parkland shareholders. However, Sunoco negotiated the right to switch the offer into a takeover bid, which only needs support from 50 per cent of all outstanding Parkland shares, at any time up until the June 24 meeting.
Simpson Oil’s decision to back the takeover means it will likely win support from more than 66.6 per cent of shareholders, as Parkland is now widely held by arbitrage funds that invested in the company on the expectation that the deal would close. The transaction also requires federal government approval.
Editor’s note: A previous version of this article incorrectly stated that Sunoco's bid for Parkland consisted of $19.80 per share in cash and 0.295 of Suncor units. In fact, the bid included 0.295 of Sunoco units.