Hedge fund Engine Capital LP launched a campaign for a new board of directors at Parkland Fuel Corp. PKI-T on Monday, a move aimed at pressing the gas-station operator to follow through on a strategic review started last week.
Engine wants a new board, including directors appointed by Parkland’s largest shareholder, Simpson Oil Ltd., to oversee a process that could involve the sale of one of the country’s largest retailers, which operates more than 4,000 outlets under brands such as On the Run.
“It is clear that the board has failed in its core responsibility to act in the best interests of shareholders and therefore cannot be trusted to oversee the strategic review,” said New York-based Engine in a press release.
“We firmly believe that a comprehensive reconstitution of the board, including the appointment of shareholder representatives and qualified independent directors, is necessary to ensure a thorough evaluation of all paths to delivering enhanced shareholder value,” said Engine, which owns a 2.5-per-cent stake in Parkland.
Parkland’s stock price rose by 2 per cent on Monday after Engine made its announcement, giving the company a market capitalization of $6.4-billion. The shares are up 13 per cent so far this year, after a Feb. 10 decision from the Ontario Supreme Court ruled Simpson Oil, which owns a 19-per-cent stake in Parkland, could play an activist role at the company.
In early March, Calgary-based Parkland started the review of its operations. Parkland hired investment banks Goldman Sachs Canada and BofA Securities as its financial advisers. At the time, the company said: “There are no guarantees the strategic review process will result in a transaction.”
For the past two years, New York-based Engine has been pushing Parkland to improve financial performance with tactics that included breaking up the company. Parkland has sold its propane business and has gas stations in Florida on the auction block as part of a strategic plan to diversify its fossil fuel business into electric-vehicle charging stations and convenience stores selling meals and snacks.
On Monday, Engine said Parkland needs a new board because directors and management “have executed poorly on their previously announced non-core asset divestment program.”
Simpson Oil had two directors on the Parkland board until January, 2024, when they resigned over a governance disagreement. In an interview last week, Parkland chair Michael Jennings said one of the goals of the strategic review is to bring Simpson Oil representatives back on to the board.
Last year, The Globe and Mail reported Parkland turned down an $8-billion takeover offer from U.S. energy company Sunoco LP, made in 2023. In regulatory filings, Parkland disclosed it turned down a bid, but did not identify the potential buyer or the price.
Engine said Parkland’s directors failed to take advantage of the 2023 takeover offer, and said part of its reason for trying to reconstitute the board is to ensure any future bid is taken seriously. The fund manager said: “We suspect that the company’s offer for Simpson Oil to rejoin the board and participate in the strategic review is tactical given that the board previously excluded Simpson Oil’s director representatives from the special committee formed to evaluate the 2023 bid.”
Cayman Islands-based Simpson Oil acquired its stake in Parkland in two transactions, the first of which took place seven years ago. Founder Sir Kyffin Simpson sold the company a network of 526 gas stations stretching across 23 Caribbean countries for $2.35-billion in cash and Parkland shares.