Parkland Shareholder Urges Company to Consider Selling

Engine Capital LP, a shareholder of Parkland Corp. holding about 2.5% of the company’s outstanding shares, sent a letter to Parkland’s board of directors supporting Simpson Oil Ltd.’s request for a strategic review at Parkland.

Parkland had previously rejected Simpson’s request, noting a review doesn’t consider the best interests of a majority of shareholders.

In Engine Capital’s letter, the shareholder reveals its belief that a sale of the company would result in a transaction at a superior price to the present value of the current strategic plan. Engine Capital outlined significant synergies that convenience store acquirers have been able to extract from mergers and acquisitions (M&A) in the chart below.

“In the case of Parkland, depending on the ultimate buyer, we believe synergies could amount to hundreds of millions of dollars,” the letter stated.

Engine Capital shared that it believes Parkland has failed in three areas: operations, capital allocation and governance.

More specifically, the shareholder expressed disappointment in Parkland allowing its expenses to grow faster than its gross profit from 2019 to 2023.

Additionally, it doesn’t approve of the current capital allocation strategy.

“The board is making the serious mistake of not maximizing the opportunity to repurchase its undervalued shares today so that it has the option to pursue M&A post-2025 when it’s not even clear recent M&A has created any value,” the letter said.

Finally, Engine Capital believes the board is using self-serving governance tactics.

“The board has an important decision to make. At this juncture, it can spend shareholders’ money to enforce its views of the governance agreement (which prevents Simpson from voting against the board) or it can explore strategic alternatives and maximize value for all shareholders,” the letter stated.

As Engine Capital encourages Parkland’s board to consider selling, it noted a possible transaction price of $64 per share, which would represent a 56% premium to the unaffected price of Parkland.