The conflict between Parkland Crop is heating up. and major shareholder Simpson Oil

CALGARY – Fuel retailer Parkland Corp. internal strife continues as the Calgary-based company rejects calls from its largest shareholder to consider a potential sale of the business.

It's the latest development in a months-long dispute with Simpson Oil, which owns about 20 percent of Parkland's stock but has no seat on the fuel retailer's board after two directors nominated by Simpson resigned in December.

Simpson did not give a reason for his resignation at the time, but last week sent a letter to Parkland's board urging it to immediately “begin considering strategic alternatives, including transitioning the company to new ownership.”

Cayman Islands-based Simpson said in a press release that such a review is “critical to optimizing Parkland's operational and financial performance.”

“As a supportive partner, we have consistently encouraged the company to increase value and return to shareholders. The results fell short of our expectations,” Simpson Oil said.

Parkland said on Sunday night that the current call for a strategic review was an attempt by Simpson to “circumvent established corporate governance without regard to the interests of all shareholders”.

The move by Parkland Simpson violates the terms of a 2019 management agreement, in which Simpson agreed to a series of provisions that ensure he cannot exercise undue influence and control over Parkland to further his own interests.

“Parkland will continue to honor the terms of the management agreement while remaining committed to working with Simpson,” Parkland said.

Simpson Oil is the former owner of Caribbean fuel retailer Sol, which has since been acquired by Parkland. Simpson has been a Parkland shareholder since 2017.

Simpson's call for a strategic review of Parkland marks the second time in more than a year that a shareholder has gone public with concerns about the company's direction.

Last March, U.S. activist investor Engine Capital LP publicly called for Parkland to divest itself of what it calls “non-core assets” and become a cleaner fuel and convenience retailer.

While Parkland Engine's offer to sell or divest its Burnaby, BC refinery has been rejected, the company has made other changes, including putting a number of other assets up for sale, such as certain retail locations, and making changes to its board of directors.

In a research note on Sunday, CIBC Capital Markets analyst Kevin Chiang said Simpson Oil's public call for a strategic review indicates an “impasse” in discussions between Parkland and its largest shareholder.

He said he agreed with Simpson's assessment that Parkland has underperformed the broader market over the past few years, and that Simpson taking a more proactive approach could be a good thing.

“While we will have to see how (Simpson and Parkland) work through their issues, we view this latest development as positive for (Parkland's) share price,” Chiang wrote.

Parkland's stock price has fallen since February, but was up more than five percent at $42.99 by midday Monday.

“We believe tensions between Parkland and its largest shareholder have created overshoot amid high uncertainty, which we believe has been a key driver of recent underperformance,” RBC Capital Markets' Luke Davis said in a note.

This Canadian Press report was first published on April 15, 2024.

Companies in this story: (TSX:PKI)

Amanda Stevenson, Canadian Press