Mergers & Acquisitions

Suncor Decides Future of Petro-Canada C-Store Chain

Activist investor pressure-induced review leads to decision to retain gas stations
Photograph: Shutterstock

CALGARY, Alberta — Four months after suggesting it might sell off its Petro-Canada convenience-store chain, Suncor Energy says it will opt to keep and improve the retail gas station business.

Following investor pressure, Calgary, Alberta-based Suncor Energy earlier this year entered into an agreement with New York-based fund Elliott Investment Management LP for the integrated energy company to explore the sale of its 1,500 Petro-Canada gas stations and convenience stores in Canada.

Analysts value Petro-Canada at an estimated $10 billion Canadian ($7.7 billion U.S.), according to a Bloomberg report in July. At the time, top contenders to acquire Petro-Canada included Circle K owner Alimentation Couche-Tard Inc., Laval, Quebec; Parkland USA parent Parkland Corp., Calgary; EG America LLC/Cumberland Farms owner EG Group, Blackburn, U.K.; and 7-Eleven Inc. parent Seven & i Holdings Co. Ltd., Tokyo. All have substantial or growing portfolios in the United States.

After a thorough review, Suncor’s board has decided it will retain and continue to improve and optimize the retail outlets, increasing the EBITDA contribution and strengthening Suncor’s integrated refining and marketing business. This will include continued optimization of the Petro-Canada retail sites across the network as well as continued expansion of strategic partnerships in non-fuel related businesses such as quick-service restaurants (QSRs), convenience stores, loyalty partnerships and energy transition offerings.

“After careful consideration, the board has concluded that retaining and optimizing the company’s retail business will generate the highest long-term value for shareholders and therefore, has unanimously decided to retain and continue to optimize the network and expand strategic partnerships for the Petro-Canada retail business that enhance our capabilities and capture increased revenue and cash flow opportunities,” said Suncor Board Chair Mike Wilson. “Petro-Canada is a unique, differentiated, and strategic asset due to its strong national network and best in market consumer brand and loyalty program.”

The review highlighted the strength of the retail business, both as a leading marketer in Canada and as a key element of Suncor’s integrated model, particularly in downstream. Petro-Canada has 18% of Canadian retail fuel sales as measured by Manchester, U.K.-based Kalibrate Technologies Ltd. and its London, Ontario-based subsidiary Kent Group Ltd. And Petro-Canada has more than 3 million members active in its fuel loyalty program.

A committee comprised of independent directors with support from independent external advisors and management oversaw the review and analysis of the retail business. The scope of the review consisted of an analysis of the existing business, including an assessment of the value of Suncor’s integrated model, case studies from comparable peers, studies of the future of retail in Canada and Petro-Canada’s growth plans.

The board also reviewed preliminary indications of interest from a global set of third parties in acquiring the Petro-Canada business, through an independent market check process, and considered feedback from a broad range of Suncor stakeholders including investors. The committee considered the pros and cons of a range of alternatives and the likelihood of capturing long-term value for Suncor if the company sold the business.

Suncor acquired Petro-Canada in 2009. Petro-Canada’s operations include oil sands development, onshore and offshore oil and gas production, petroleum refining and petroleum product marketing, with more than 1,500 retail outlets and 300 Petro-Pass wholesale locations in Canada.

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