Updated: U.S.-based Sunoco signs deal to purchase Parkland Corp.
U.S. energy company Sunoco LP has signed an agreement to buy Parkland Corp. in a cash-and-stock deal valued at US$9.1 billion, including assumed debt.
The deal comes as Calgary-based Parkland faces an attempt by Simpson Oil Ltd., its largest shareholder, to replace a majority of its board of directors.
Parkland cancelled its annual meeting set for Tuesday and rescheduled it to June 24, when shareholders will also be asked to approve the Sunoco deal.
Under the terms of the agreement, Parkland shareholders will receive 0.295 SUNCorp units and C$19.80 for each Parkland share. Parkland shareholders may also elect to receive C$44 per Parkland share in cash or 0.536 SUNCorp units for each Parkland share, subject to limits.
In addition to its refinery business, Parkland has about 4,000 locations around the globe. Brands include, its On the Run convenience network, Pioneer, Ultramar, Esso, Chevron and Fast Gas Plus.
"This strategic combination is a compelling outcome for Parkland shareholders," said Michael Jennings, executive chairman of Parkland. "The Board unanimously recommends the proposed transaction, recognizing Sunoco’s commitment to safeguarding Canadian jobs, retaining the Calgary head office, and further investing in Canada. This partnership creates significant financial benefits for shareholders and would position the combined company as the largest independent fuel distributor in the Americas."
"Today marks a significant milestone," said Bob Espey, president and CEO of Parkland. "This transaction delivers immediate value for shareholders, including an attractive 25% premium. Sunoco shares our commitment to growth, customer service, operational excellence, and ongoing investment in Canada, making our combined business stronger and better positioned for sustained success."
In a conference call with the business press, Espey said the coming together of the two companies “delivers compelling financial benefits that we are confident will maximize the value for Parkland shareholders.”
“It optimizes for stability and creates the largest independent fuel distributor in the Americas, and positions shareholders to benefit from future growth through increased cashflow and for reinvestment in the Canadian business.”
Espey added that Sunoco has said it will continue to invest across the business and in Canada, and shows, “an understanding of our country’s economic priorities and their respect for our company’s heritage and commitment to our local communities.”
Joe Kim, president and chief executive officer with Sunoco at the same conference call, said he believes the combination of Parkland and Sunoco “not only creates great opportunities for our collective employees, but also creates a strong, more compelling investment case for current Parkland shareholders and future Sunoco stakeholders.”
“Bottom line, the larger company will be more stable, strong financially and better positioned for growth.”
According to Patrick De Haan, head of petroleum analysis at GasBuddy, the coming together of these two companies is part of an ongoing set of mergers happening across the North American convenience industry. He pointed to the talks between the parent company of 7-Eleven, Seven & i Holdings and Alimentation Couche-Tard Inc. driven by increasing competition in the sector by large box retailers entering into the convenience and gas bar business
“You have a lot of larger box stores that have grown in size and that could bring with it additional competition in this space and with it additional mergers and acquisitions in the future as [convenience operations] look to compete with these larger players,” De Haan told Convenience Store News Canada + OCTANE.
Last month, Espey announced that we was stepping down as as president and chief executive officer or Parkland, but said he would stay on with the company until the appointment of a new CEO or the completion of the strategic review Parkland had begun earlier to decide upon the fate and direction of the company.
The strategic review aimed to identify opportunities to maximize shareholder value by evaluating the current business strategy and optimization opportunities, while also considering alternatives including asset divestments, acquisitions, transformative business combinations and a possible sale of the Parkland.
In addition to shareholder and court approvals, the deal is subject to regulatory approvals, including approval under the Investment Canada Act. Sunoco has committed to maintain a Canadian headquarters in Calgary and significant employment levels in Canada.
It has also committed to continuing to invest in Parkland's refinery in Burnaby, B.C.
According to Parkland the benefit of this deal is that is offers both companies complementary assets that will enhance fuel supply and further diversifies Sunoco’s portfolio and geographic footprint and increases cash flow for reinvestment and distribution growth.
Sunoco will also continue to support Parkland’s plan to expand its Canadian transportation energy infrastructure, and the combined company’s expanded cash flow will provide additional resources for reinvestment in Canada, the Caribbean, and the United States in support of both existing and new opportunities.
- With additional files from Parkland Corporation and reporting from Convenience Store News Canada.
-This is a developing story, more to come.
