A U.S. activist investor has set its sights on Calgary-based Parkland Corp., urging the fuel retailer to think about selling or spinning off its Burnaby, B.C., refinery.
Recent York-based Engine Capital LP., which owns a few two per cent stake in Parkland, sent a letter to the corporate’s board on Wednesday. Within the letter, Engine criticized Parkland for being “unable to translate its advantaged strategic position and quality assets into adequate returns for shareholders,” and said the corporate could achieve higher performance by becoming a pure play fuel and convenience retailer and eliminating non-core assets.
“We’re particularly troubled by Parkland’s staggering underperformance in comparison with Canadian convenience retailer champion, Alimentation Couche-Tard,” Engine managing partner Arnaud Ajdler and partner Brad Favreau wrote, adding the investment fund proposes Parkland sell or spin off its Burnaby refinery in addition to its heating oil and propane distribution businesses.
“We aware of several parties fascinated with these different assets,” they wrote.
Parkland purchased the Burnaby refinery — which refines 55,000 barrels per day of crude and artificial oil into gasoline, diesel, jet fuels and more — from Chevron Canada for $1.5 billion in 2017.
In an emailed statement Wednesday, Parkland acknowledged the receipt of Engine’s letter. It said while it continues to work to boost shareholder value, it’s expecting to realize record adjusted earnings in 2023 and has high confidence it may achieve its goal of reaching $2 billion in adjusted earnings by 2025 without further acquisitions.
“The corporate appreciates constructive shareholder input and can provide an update sooner or later,” Parkland said in its statement.
On the retail side, Parkland is considered one of the fastest growing independent fuel suppliers and marketers in North America, with a network of retail service stations across Canada, the northern U.S., and the Caribbean.
Its On the Run convenience store brand is predicted to have greater than 1,000 locations by 2024.
Engine can be calling for a refresh of Parkland’s board. The activist investor criticized the corporate for the length of time some board members — including chair Jim Pantelidis — have served, in addition to its approach to executive compensation.
Engine, which is requesting a gathering with the board, said in its letter that if the board is unwilling to think about its proposals it should consider a sale of the complete company to either private equity or “strategic buyers.”
On its website, Engine Capital says it launched in 2013 and infrequently engages with management teams and boards of directors to create value for the advantage of all shareholders.
“We’re in search of undervalued corporations where we understand the rationale for the mispricing and where change is happening to shut this value gap,” the investment fund states.
In a note to clients Wednesday, RBC Capital Markets analyst Luke Davis said he believes that usually, Parkland’s major shareholders are aligned with the corporate’s current strategy and “are inclined to be passive, though the important thing concerns outlined have been points of contention for select investors and will gain some traction.”
Engine said in its letter to the board that it believes Parkland’s stock could possibly be value around $45 per share, a 55 per cent premium to its recent price.
Parkland shares were up near nine per cent as of midday Wednesday, at $31.82.
