Hedge fund Engine Capital has launched a campaign to overhaul the board of directors at Parkland Fuel, urging the gas station operator to act decisively on its strategic review initiated earlier this month, according to a report by the Globe & Mail.
The activist hedge fund, which owns a 2.5% stake in Parkland, is calling for a complete reconstitution of the board to ensure that shareholder interests are adequately represented, particularly as the company explores the potential sale of some of its assets.
Engine Capital has voiced strong disapproval of the current board, stating that it has “failed in its core responsibility to act in the best interests of shareholders.” The New York-based hedge fund believes that a new board, with key appointments from Parkland’s largest shareholder Simpson Oil, is essential to oversee the strategic review effectively and explore all potential avenues for delivering enhanced shareholder value.
The campaign comes shortly after Parkland, which operates over 4,000 retail outlets, including under the On the Run brand, initiated a strategic review of its operations in early March. The company has engaged Goldman Sachs Canada and BofA Securities as financial advisers for the review process. However, Parkland emphasised that there are no guarantees the review will lead to a transaction.
Parkland has been restructuring in recent years, selling off non-core assets, including its propane business, and preparing to auction off its Florida gas stations. The company is also shifting its focus towards diversifying into electric vehicle charging stations and convenience stores. Despite these moves, Engine has continued to push for further changes, particularly in Parkland’s governance.
Simpson Oil, which holds a 19% stake in Parkland, has played a key role in the ongoing dispute. The company’s influence at Parkland was diminished in January 2024, when two of its board members resigned due to governance disagreements. In response, Parkland’s Chairman, Michael Jennings, indicated that one of the strategic review’s objectives is to bring Simpson Oil representatives back to the board.
Parkland’s stock price rose by 2% on Monday following Engine Capital’s announcement, giving the company a market capitalisation of $6.4bn. The shares have risen 13% so far this year, bolstered by a ruling from the Ontario Supreme Court in February, which cleared the way for Simpson Oil to play a more activist role.
In addition to calling for board changes, Engine has criticised Parkland for failing to take advantage of a potential acquisition offer last year. According to The Globe and Mail, Parkland rejected an $8bn takeover bid from Sunoco, a US-based energy company. While Parkland disclosed the bid, it did not reveal the identity of the potential buyer or the price.
Engine argues that Parkland’s board mishandled this opportunity and believes that restructuring the board will ensure that any future bids are given proper consideration.
