An activist investor wants Parkland Corp. to explore strategic alternatives for what it says are the company’s non-core assets with the goal of becoming a more focused fuel and convenience store retailer. A boat travels past the Parkland Burnaby Refinery on Burrard Inlet at sunset in Burnaby, B.C., on Saturday, April 17, 2021. THE CANADIAN PRESS/Darryl Dyck
By Amanda Stephenson in Calgary
A U.S. activist investor has set its sights on Calgary-based Parkland Corp., urging the fuel retailer to consider selling or spinning off its Burnaby, B.C., refinery.
New York-based Engine Capital LP., which owns about a two per cent stake in Parkland, sent a letter to the company’s board on Wednesday. In the letter, Engine criticized Parkland for being “unable to translate its advantaged strategic position and quality assets into adequate returns for shareholders,” and said the company could achieve better performance by becoming a pure play fuel and convenience retailer and getting rid of non-core assets.
“We are particularly troubled by Parkland’s staggering underperformance compared to Canadian convenience retailer champion, Alimentation Couche-Tard,” Engine managing partner Arnaud Ajdler and partner Brad Favreau wrote, adding the investment fund proposes Parkland sell or spin off its Burnaby refinery as well as its heating oil and propane distribution businesses.
“We aware of several parties interested in these different assets,” they wrote.
Parkland purchased the Burnaby refinery — which refines 55,000 barrels per day of crude and synthetic oil into gasoline, diesel, jet fuels and more — from Chevron Canada for $1.5 billion in 2017.
In an emailed statement Wednesday, Parkland acknowledged the receipt of Engine’s letter. It said while it continues to work to enhance shareholder value, it is expecting to achieve record adjusted earnings in 2023 and has high confidence it can achieve its goal of reaching $2 billion in adjusted earnings by 2025 without further acquisitions.
“The company appreciates constructive shareholder input and will provide an update in due course,” Parkland said in its statement.
On the retail side, Parkland is one of the fastest growing independent fuel suppliers and marketers in North America, with a network of retail service stations across Canada, the northern U.S., and the Caribbean.
Its On the Run convenience store brand is expected to have more than 1,000 locations by 2024.
Engine is also calling for a refresh of Parkland’s board. The activist investor criticized the company for the length of time some board members — including chair Jim Pantelidis — have served, as well as its approach to executive compensation.
Engine, which is requesting a meeting with the board, said in its letter that if the board is unwilling to consider its proposals it should consider a sale of the entire company to either private equity or “strategic buyers.”
On its website, Engine Capital says it launched in 2013 and often engages with management teams and boards of directors to create value for the benefit of all shareholders.
“We are looking for undervalued companies where we understand the reason for the mispricing and where change is occurring to close this value gap,” the investment fund states.
In a note to clients Wednesday, RBC Capital Markets analyst Luke Davis said he believes that in general, Parkland’s major shareholders are aligned with the company’s current strategy and “tend to be passive, though the key concerns outlined have been points of contention for select investors and could gain some traction.”
Engine said in its letter to the board that it believes Parkland’s stock could be worth around $45 per share, a 55 per cent premium to its recent price.
Parkland shares were up close to nine per cent as of midday Wednesday, at $31.82.
This report by The Canadian Press was first published March 22, 2023.
Companies in this story: (TSX:PKI)
The Canadian Press
- 0079 Ministry of Energy Business_incentive PO0079 Ministry of Energy Business_incentive PO
- 0078 LHOS 20240078 LHOS 2024
- 0077 Caprice Resources Stand Up For Free Speech0077 Caprice Resources Stand Up For Free Speech
- 0053 Kingston Midstream Westspur Alameda0053 Kingston Midstream Westspur Alameda
- 0076 Latus only0076 Latus only
- 0073 SaskWorks-Pipeline Online0073 SaskWorks-Pipeline Online
- 0063 Turnbull Excavating hiring crusher0063 Turnbull Excavating hiring crusher
- 0061 SIMSA 2024 For Sask Buy Sask0061 SIMSA 2024 For Sask Buy Sask
- 0058 Royal Helium Steveville opens anonymous rocket0058 Royal Helium Steveville opens anonymous rocket
- 0055 Smart Power Be Smart with your Power office0055 Smart Power Be Smart with your Power office
- 0051 JML Hiring Pumpjack assembly0051 JML Hiring Pumpjack assembly
- 0049 Scotsburn Dental soft guitar0049 Scotsburn Dental soft guitar
- 0046 City of Estevan This is Estevan0046 City of Estevan This is Estevan
- 0041 DEEP Since 2018 now we are going to build0041 DEEP Since 2018 now we are going to build
- 0032 IWS Summer hiring rock trailer music
- 0022 Grimes winter hiring
- 0021 OSY Rentals S8 Promo
- 0018 IWS Hiring Royal Summer
- 0013 Panther Drilling PO ad 03 top drive rigs
- 0011
- 0006 JK Junior
- 0002 gilliss casing services0002 gilliss casing services
- 9002 Pipeline Online 30 sec EBEX9002 Pipeline Online 30 sec EBEX
- 9001