Engine Capital, which owns about 2.5% of Parkland Corp.’s shares, is asking the fuel supplier and convenience-store operator to continue optimizing company operations to increase long-term value.
The shareholder sent a letter to Parkland’s board of directors on Tuesday that commended its recent activity to “unlock shareholder value” while also suggesting that it announce more “value-sharing initiatives” at the retailer’s upcoming analyst day on Nov. 14.
After receiving criticism from Engine Capital in the spring, Parkland announced in May it would be selling up to $368.5 million (U.S.) of non-core assets. Then in July, Jim Pantelidis, Parkland Corp.’s chair of the board, announced his retirement. Engine Capital had previously called Pantelidis Parkland’s “over-tenured chairman,” as he had been with the company for more than two decades.
- Parkland USA is No. 37 on CSP’s 2023 Top 202 ranking of U.S. convenience-store chains by company-owned store count.
“Despite these initiatives, Parkland remains deeply undervalued, trading at an EV-to-EBITDA [enterprise value to earnings before interest, taxes, depreciation and amortization] multiple of 6.5x and a 2024 maintenance free cash flow yield north of 13%,” the letter from Engine Capital said. “We believe Parkland’s upcoming November analyst day provides an opportunity for leadership to announce additional value-enhancing initiatives and further highlight the value of the business.”
Parkland Corp. was already planning to share further updates on its growth plans and capital allocation priorities during its upcoming investor day on Nov. 14, Simon Scott, director of corporate communications for Parkland Corp., told CSP Daily News.
In early September, Parkland Corp. announced that strong performance led to increased 2023 adjusted EBITDA guidance and has accelerated the delivery of the company’s $1.5 billion (U.S.) adjusted EBITDA ambition of $1.5 billion (U.S.) to 2024. This was a year earlier than expected, without further acquisitions, Simon said.
The company reached its EBITDA goals sooner “by integrating acquired companies, capturing synergies and driving organic growth and cost efficiencies,” Parkland Corp. President and CEO Bob Espey said in a statement.
“We have built a strong platform for continued growth,” Espey said. “The operational improvements we have made are enabling us to reduce leverage, increase cash flow and enhance returns."
Engine Capital’s Requests
Engine Capital outlined five actions that it said has the potential to unlock significant shareholder value and help the market value Parkland more appropriately. Those are:
- Communicate Parkland’s long-term cash flow opportunity.
- Develop and communicate a precise long-term capital allocation framework.
- Further refine Parkland’s compensation framework to better align management incentives with shareholders’ interests.
- Announce an additional $100 million of cost savings by 2025 and commit to higher return on invested capital (ROIC) target.
- Continue to focus on simplifying the business and divesting non-core assets.
Engine Capital advised Parkland to abstain from merger and acquisition (M&A) for the time being. But from 2026 to 2028, when the company’s operations have been optimized, Parkland could consider M&A again, the investor said.
Parkland Leadership Shifts
Aside from changes to its board, Parkland Corp. has had significant turnover to its staff over the last year. Donna Sanker took over as president of Parkland USA in January following the departure of Doug Haugh. Jeff Bush, Parkland USA’s vice president of retail, left the company in April and the roll was filled in September by Troy Dickson. Parkland Corp. also appointed Francis Lapointe as its new vice president of retail for Canada.
Parkland Corp., Calgary, Alberta, is a major independent supplier and marketer of fuel and petroleum products in Canada, the United States, the Caribbean and the Americas through retail, commercial and wholesale channels. It is the second-largest c-store operator in Canada, with 650 retail outlets and more than 1,830 dealer sites. Parkland USA operates more than 200 c-stores in 13 western states.
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