Traffic passes by an Ultramar gas station on Broadview Ave. and Bater Ave. in Toronto on Mar 26.Fred Lum/The Globe and Mail
Gas station owner Parkland Corp. PKI-T has accelerated plans to raise cash from asset sales by putting its outlets in Florida up for sale on Tuesday, the latest planned divestments from a Calgary-based company facing activist campaigns from two of its shareholders.
Parkland announced it is auctioning off all of its operations in Florida – 100 stores and gas stations, nine fuel depots that cater to commercial fleets and four storage facilities – and analysts expect the division will fetch between $240-million and $320-million.
Parkland runs over 4,000 outlets in Canada, the United States and the Caribbean, including the On the Run chain, and is targeting more than $500-million in assets sales by the end of 2025. The total includes $115-million from the sale of the company’s Canadian propane business that is expected to close in the fourth quarter of the year. In February, Parkland announced plans to sell up to 157 gas stations and stores in Canada, including outlets operated under the Chevron, Ultramar and Pioneer brands.
Parkland plans to use money raised from selling businesses to pay down debt and fund expansion of its remaining businesses, including electric vehicle charging stations. “This disposition reflects our commitment to direct capital towards our highest return opportunities,” said Parkland chief executive officer Bob Espey in a press release. “We remain deeply committed to our northern U.S. business, which is performing well and has strong connectivity with Canada.”
Parkland has invested about $400-million in its Florida operation, in part because the region is close to the company’s extensive Caribbean retail network. In a report, analyst Nate Haywood at ATB Capital Markets said; “Despite the original viewpoint of Florida being a strategically positioned asset for Parkland given the close proximity to the Caribbean, the lower synergy capture, increased competitiveness and supply logistics have limited the upside for the business in Parkland’s portfolio.”
Parkland’s Florida unit generated $40-million of the company’s projected 2024 earnings before interest, taxes, depreciation and amortization (EBITDA), or 2 per cent of company’s total EBITDA, according to analysts.
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“Given the relative size of Florida operations, and geographic positioning relative to the remainder of Parkland’s U.S. assets, we are not overly surprised with the announcement,” said analysts Tom Callaghan and Irene Nattel at RBC Capital Markets in the report.
Over the past year, Parkland’s largest shareholder, Barbados-based Simpson Oil Ltd., and hedge fund Engine Capital LP have pushed the company to put itself up for sale or sell some of its units. Simpson Oil owns 19.7 per cent of Parkland and New York-based Engine Capital has a 2-per-cent stake.
In August, Simpson Oil asked the Ontario Supreme Court to end a five-year-old agreement restricting its ability to vote its Parkland shares. In response, Parkland chairman Michael Jennings said in a press release: “Parkland has worked tirelessly to resolve differences with Simpson Oil, whose latest actions indicate they are seeking greater influence over our board than we believe is in the best interests of all our shareholders.”
Earlier this year, Parkland disclosed its board turned down a takeover offer in 2023. Last month, The Globe and Mail reported Parkland turned down an $8-billion takeover offer from Sunoco LP last year.
Parkland has a far larger collection of businesses than rival convenience store and gas station chains such as Montreal-based Alimentation Couche-Tard Inc. and Casey’s General Stores Inc., headquartered in Des Moines, Iowa.
In addition to gas stations, Parkland owns a refinery in Burnaby, B.C., acquired from Chevron Corp. in 2017 as part of a package of gas stations. Two years ago, the company acquired frozen food retailer M&M Food Market for $322-million (the chain had 300 stores at the time with its products sold in more than 2,000 locations).
Parkland shares trade at a significant discount to the valuation on Couche-Tard and Casey’s, Mr. Heywood said in a report. Parkland shares trade at 6.6 times the retailer’s forecast EBITDA, while Couche-Tard is at 10.8 times and Casey’s shares are valued at 12.9 times EBITDA.