U.S. fuel supplier Sunoco has struck a $9.1-billion deal to buy Canada-based Parkland, a move that would create the Americas’ largest independent fuel distributor but which Parkland’s largest shareholder immediately criticized.
Sunoco’s offer was unanimously approved by Parkland’s board, the companies said on Monday. But Parkland’s largest shareholder, Simpson Oil, called the deal a “last-ditch attempt” by Parkland’s board to retain control.
Simpson said it was seeking a court injunction to force Parkland to hold a board election, but an Alberta judge denied the request later in the day.
Dallas-based Sunoco first put forward an expression of interest in the Calgary-based fuel refiner and retailer in 2023. That offer was not accepted, but Parkland’s board “left the door open” to future offers from the company, a source said.
Under terms of the deal, whose total value includes debt, each Parkland share will be exchanged for C$19.80 in cash and 0.295 Sunoco unit — a 25% premium over the seven-day volume-weighted average price.
Parkland management hailed Monday’s deal as a path to greater financial stability and growth. The company had undertaken a strategic review in March following persistent pressure from Simpson Oil, which holds a nearly 20% stake, and activist investor Engine Capital — both of whom had been outspoken critics of the company’s lagging share price performance.
Parkland cancelled its May 6 annual general meeting and instead scheduled a special meeting for June 24 at which Parkland shareholders will vote on the Sunoco transaction.
Michael Shaw, portfolio manager with Franklin Templeton’s ClearBridge Investments, said in an interview he has not yet decided whether he will support the deal.
“The market’s going to have to think about this,” Shaw said, adding he needs to weigh whether there is a hypothetical scenario where Parkland could improve its performance and receive a better offer down the road.
In a statement on Monday, Simpson Oil — which had been trying to wrest control of the company’s board by proposing its own proxy slate of board candidates — said it has applied for a court injunction to force Parkland to hold the annual general meeting on May 6 as initially planned.
Simpson said Parkland’s board is pushing ahead with the deal despite losing shareholders’ confidence.
ASSETS ALIGN
Parkland counts 4,000 retail and commercial locations across Canada, the U.S., and the Caribbean region, while Sunoco has an existing network of 7,400 Sunoco and partner-branded locations spanning the U.S., Puerto Rico, Europe, and Mexico.
If the deal goes through, Sunoco will also be acquiring Parkland’s 55,000-barrel-per-day Burnaby refinery, which produces 25% of the transportation fuel used in Canada’s westernmost province of British Columbia.
The two companies’ assets align nicely together, said ATB Capital analyst Nate Heywood, who added shareholders will likely approve the deal since it is hard to see where a better offer would come from.
“Sunoco is probably the most strategically positioned for this type of acquisition,” Heywood said.
Shares of Sunoco closed down 5.8% on Monday while those of Parkland ended up 5.5%.
The acquisition marks Sunoco’s second major deal in recent years. In 2024, Sunoco acquired fuel storage and pipeline operator NuStar Energy for $7.3 billion.
The Parkland deal is expected to close in the second half of the year and deliver over $250 million in annual cost savings by the third year.
Sunoco said the transaction will boost cash flow by more than 10% and allow the combined company to return to its target debt levels within 12 to 18 months of closing.
To fund the cash portion, Sunoco has secured a $2.65 billion, 364-day bridge loan, a short-term facility often used to bridge financing gaps in large deals.
The deal is subject to approval under the Investment Canada Act, which reviews large-scale acquisitions of Canadian companies by foreign buyers.
Sunoco has pledged to retain Parkland’s Canadian headquarters in Calgary, maintain significant Canadian employment levels, and continue to invest in the Burnaby refinery.
Source: Reuters.com