Parkland Corp.’s largest shareholder, Simpson Oil Ltd., is asking the Calgary, Alberta-based company’s board of directors to conduct a strategic review and consider selling the company. The fuel distributor and convenience retailer responded saying a strategic review is “unnecessary and does not consider the best interests of the majority of our shareholders.”
A strategic review of the company is needed to optimize Parkland’s operational and financial performance, Simpson Oil said in an April 12 news release. Simpson Oil, which has a 19.7% share in Parkland, said significant value creation opportunities are available to an operator with the “appropriate focus on prudent capital allocation, cost discipline, alignment of management compensation and strong corporate governance.”
Simpson Oil said since its January 2019 investment in Parkland, the company has underperformed the S&P/TSX Composite Index by 4.8% per year for a “lackluster” total annual return including dividends of 6.8%. That is after a near 33% return since January 2023, Simpson Oil said.
Excluding this most recent period, the annual return to shareholders over a four-year timeframe was negative 0.3%, in contrast to the five years prior to Simpson Oil’s investment in which Parkland generated an annual return of 18.8%.
“We believe that [Parkland Corp.] has stopped pursuing its previous strategies that made it such a compelling investment, and the market seems to concur with our view,” Simpson Oil said.
Simpson Oil said it has shared its concerns at the board and shareholder level, but Parkland Corp. appears “disinterested in constructive feedback or recommendations for improvement from shareholders. This has compelled us to change our approach to protect our investment and our shareholder rights.”
Significant value of Parkland can be unlocked with the right stewardship, Simpson Oil said.
“As such, we would be open to participating in a transaction that would provide Parkland shareholders with the opportunity to exchange their shares for shares of another operator committed to pursuing value creating strategies for shareholders, optimizing the company's core assets and competencies and executing disciplined capital allocation,” Simpson Oil said. “We would welcome the opportunity to discuss our value creation thesis with potential partners.”
Parkland Corp. Responds
On April 14, Parkland Corp. issued a statement in response to Simpson Oil Limited’s request for a review and potential sale of the company. Parkland’s board of directors continuously evaluates opportunities to enhance and maximize shareholder value, the company said.
“The current call for a strategic review represents another attempt by Simpson Oil Limited to circumvent established corporate governance without considering the interests of all shareholders,” Parkland Corp. said.
- Parkland USA is No. 37 on CSP’s 2023 Top 202 ranking of U.S. convenience-store chains by company-owned store count.
While Simpson Oil had nominees on Parkland’s board in 2023, Simpson solicited a potential sale of Parkland at a valuation significantly below the company’s intrinsic value, Parkland said. Parkland engaged legal and financial advisors that conducted a thorough evaluation of the proposed transaction. The board also established a special committee and engaged their own independent advisors.
“After careful consideration, the board determined that pursuing this alternative would not serve the best interests of the company and its shareholders,” said Steven Richardson, chair of the board. “Parkland’s board fulfils its responsibilities for the benefit of all shareholders, not at the direction of one.”
Before Simpson withdrew its nominees from the board, they participated in the development of Parkland’s strategy and plans, which, following a period of significant acquisitions, are currently aimed at capturing synergies, driving organic growth and enhancing shareholder returns, Parkland said.
“This strategy, and the clear and disciplined capital allocation framework it is built on, was presented at the company's 2023 Investor Day and received strong support from the majority of shareholders. The significant increase in share price through 2023 demonstrates the effectiveness of our current strategic focus,” Parkland said.
Simpson Oil nominees Michael Christiansen and Marc Halley left the company’s board of directors, Parkland said in December 2023. Since then, the company has appointed new board members. Another shareholder, Engine Capital, had shared concern over the departures.
Parkland said while it will continue to engage with Simpson, it plans to enforce the terms of a Governance Agreement it has with Simpson Oil, which Parkland feels like Simpson has disregarded.
Parkland Corp. is the parent company of Parkland USA, which has more than 200 c-stores in the United States under brands like On the Run.
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