Dive Brief:
- Another one of Parkland Corporation’s major shareholders is calling for the sale of the fuel and convenience retailer just days after the company’s largest investor pushed for a strategic review, according to a Wednesday announcement from activist hedge fund Engine capital.
- In a letter sent to Parkland on Wednesday, Engine Capital — which holds a roughly 2.5% stake in Parkland — said it’s “disappointed by Parkland’s rejection of Simpson’s call for a strategic review,” and that a sale would result in a transaction at a price that’s “superior to the present value of the current strategic plan.”
- This continues an ongoing dispute between Parkland and Engine Capital, which first pushed for the c-store retailer to sell the company or split its fuel and c-store businesses into separate entities in March 2023.
Dive Insight:
Engine Capital’s latest letter marks the fifth time since last March that the hedge fund has publicly pushed Parkland’s board to make significant changes at the company. Previous letters have included demands to refine Parkland’s capital allocation framework, rework management’s compensation, appoint new directors and more.
These shareholder demands began when Engine Capital expressed a broader concern about Parkland’s long-term share price underperformance, which the investor again referenced in Wednesday's letter.
Engine Capital believes that a sale of Parkland would unlock more value for shareholders than what Parkland’s current strategy has, “given that Parkland has failed to optimize its profitability, capital allocation and governance in the public market,” according to the company’s announcement.
The letter specifically notes that a sale of Parkland could yield about $64 per share, or a 56% premium to the unaffected price of the company.
“As a result of the Board’s numerous failures, Engine has reached the conclusion that Parkland is unlikely to reach its full potential as a public company and should consider a sale,” the letter says. “We believe a sale of Parkland is likely to result in superior value creation for all shareholders. Historical transactions in this space have generated significant synergies for the acquirers, who in turn have been able to pay multiples significantly above public market valuations.”
Engine Capital’s letter also highlights some of those “significant synergies” c-store companies saw from some notable mergers and acquisitions in the industry over the past several years. Those included 7-Eleven’s acquisition of Speedway, Alimentation Couche-Tard’s purchase of Holiday Stationstores and Murphy USA’s acquisition of QuickChek. On average, those synergies improved the target’s earnings before interest, taxes, depreciation and amortization by nearly 50%, Engine claimed.
With 1,860 stores in its Canadian network, Calgary, Alberta-based Parkland is the largest independent fuel retailer and second-largest c-store operator in Canada. In the U.S., Parkland operates 650 retail sites across Idaho, Montana, North Dakota, South Dakota, Wyoming, Colorado, Utah and Florida.
