A person fuels up their truck at an Ultramar gas station on Broadview Ave. in Toronto, on March 26, 2024.Fred Lum/The Globe and Mail
For Donald Trump, winning the trade war means striking deals along the lines of Sunoco LP’s proposed takeover of Parkland Corp. PKI-T, one of Canada’s largest gas station operators.
The U.S. President’s friends at Dallas-based Sunoco channeled his Make-America-Great-Again mantra when they launched a friendly $7.7-billion bid for Calgary-based Parkland on Monday.
Sunoco, whose chair is mega-MAGA Trump supporter Ray Washburne, is poised to snap up a leading domestic retailer with 4,000 outlets, including the On the Run convenience store chain, and a Burnaby, B.C., oil refinery supplying fuel to the Lower Mainland.
Sunoco stands to win this prize for less than it offered for Parkland two years ago, a bid the company rebuffed.
Mr. Trump’s tariffs aren’t the only reason Parkland is now falling into Sunoco’s arms. The Calgary-based company failed to meet its financial targets, kicking off a boardroom battle with its largest shareholder, family-controlled Simpson Oil Ltd., and hedge fund Engine Capital. Poor performance and the activist campaigns put Parkland in play.
However, like most stocks, Parkland’s share price dropped sharply after Mr. Trump launched sweeping levies on his “Liberation Day” in early April, slumping by 16 per cent in the next two sessions. We now know takeover talks between Parkland and Sunoco were taking place at the time.
Mr. Trump’s trade war knocked the stuffing out of Canadian stocks. Now the Texas company headed by his buddy has stepped up with a takeover of a major domestic fuel distributor. The President doesn’t need to make Canada the 51st state to achieve many of his nationalist economic goals.
If Parkland shareholders sign off on this transaction, as analysts expect they will, a significant domestic energy platform will feature Mr. Washburne as chair. The long-time Republican and private equity investor served as vice-chair of the Trump Victory Committee in 2016 and contributed to several of Mr. Trump’s political action committees (PACs) including the Save America PAC, which paid the President‘s legal bills.
How will the political dimensions of this deal sit with federal politicians who must sign off on Sunoco’s acquisition?
In early March, former industry minister François-Philippe Champagne raised the threshold for approving cross-border takeovers to include acquisitions with what he called the potential to “undermine Canada’s economic security.”
While the minister avoided singling out U.S. buyers, Mr. Champagne said in a release the government would guard against “opportunistic or predatory investment behaviour by non-Canadians.”
Ottawa’s stepped-up scrutiny on takeovers is weighing on Parkland’s stock price.
Sunoco is offering $44 per share, in a mix of cash and its own units, which trade on the New York Stock Exchange. Since the offer was announced early Monday, Parkland shares have traded around $38.
“We expect the current discount on Parkland shares compared to implied transaction value to represent uncertainties around navigating regulatory approval in a post U.S. Liberation Day environment” said analyst Nate Heywood at ATB Capital Markets in a report.
Sunoco is making the sort of promises every foreign buyer makes when trying to get government approval for an acquisition, including maintaining a domestic head office in Calgary, “significant employment levels in Canada” and additional investment in the refinery.
For Sunoco, the takeover offers compelling economics. The company is valued in part on its ability to pump out cash. Buying Parkland is expected to boost distributable cash by 10 per cent per unit, and yield US$250-million in annual cost savings. Sunoco declined to comment on the transaction.
Prior to Mr. Trump’s election, takeovers like this one sailed through the approval process. In 2014, Berkshire Hathaway Inc. snapped up a big chunk of Alberta’s electrical grid for $3.2-billion. No one questioned whether Warren Buffett was being opportunistic or predatory.
The Parkland takeover is a test of Canada’s economic relationship with the U.S., under Prime Minister Mark Carney, who won election on a Canada Strong platform, and a President who sees the border as an “artificially drawn line.”
Parkland shareholders are likely going to vote, overwhelmingly, in favour of Sunoco’s offer. The potential buyers are going to say all the right things about doing business in Canada, while keeping quiet about Mr. Washburne and his Republican ties. That might be enough to get a MAGA win for Mr. Trump.