Parkland Corp.’s largest shareholder Simpson Oil Ltd. has filed a lawsuit against the fuel distributor and convenience retailer.
Simpson Oil on Aug. 13 said it filed an application with the Ontario Superior Court of Justice seeking a declaration that standstill and voting restrictions under a Governance Agreement have ceased to apply based on “a material change in the composition of Parkland’s senior management since Jan. 8, 2019,” the day the agreement between Simpson Oil and Parkland Corp. was dated.
- Parkland Corp. is No. 38 on CSP’s 2024 Top 202 ranking of U.S. convenience-store chains by store count.
Parkland has rejected the assertions made by Simpson Oil, and said in an Aug. 13 statement that it was “surprised and disappointed by the application initiated by Simpson Oil Ltd. (SOL) today in the midst of Parkland’s ongoing, good faith efforts aimed at resolving its differences with SOL.”
Simpson Oil entered the Governance Agreement in 2019 as part of a transaction where Parkland acquired 75% of Simpson Oil Investment, resulting in Simpson Oil becoming a significant shareholder of Parkland, Parkland said. Governance agreements are a common instrument, where a transaction creates a significant shareholder, designed to assure certainty and stability to the company and help protect the rights of all other shareholders, Parkland said.
Simpson Oil’s Claims
Simpson Oil, which holds about 20% of Parkland Corp.’s shares, said that in accepting terms of the governance agreement in 2019, it agreed to certain standstill and voting restrictions because it was confident in the stewardship of Parkland by its senior management team at the time. It also said under the terms of the governance agreement, those restrictions would fall away on the occurrence of a “material adverse change” or MAC, which included changes in the senior management team, Simpson Oil said.
But since 2019, there has been “substantial churn” of Parkland senior management while performance of the company has suffered, Simpson Oil said.
Seven of the 10 people identified as members of Parkland’s senior management team in its 2018 Annual Information Forum have left or ceased to be senior managers, the Grand Cayman, Cayman Islands-based firm said.
“Despite the clearly material changes in the composition of Parkland's senior management, Parkland has publicly asserted that the voting and standstill restrictions under the governance agreement continue to apply, creating confusion and uncertainty in the market,” Simpson Oil said.
Prior to filing litigation, Simpson Oil said it requested that Parkland acknowledge that a material adverse change had occurred, but Parkland declined, Simpson Oil said.
“Parkland continues inappropriately to seek to insulate indefinitely its board of directors and CEO from accountability to Parkland's shareholders. Simpson Oil remains committed to protecting shareholder rights for the benefit of all shareholders, and will hold Parkland's board and CEO accountable for the proper exercise and performance of their duties, including the fiduciary duties to act in the best interests of the company and to avoid conflicts of interest,” Simpson Oil said.
Parkland’s Response
Parkland Corp. in its response to Simpson Oil’s litigation said it firmly rejects that the routine turnover in Parkland’s management team over the past five years resulted in a material adverse change that would relieve Simpson Oil of any of its obligations under the governance agreement.
Parkland said the “desperate legal maneuvering” is without precedent.
“Parkland has worked tirelessly to resolve differences with SOL whose latest actions indicate they are seeking greater influence over our board than we believe is in the best interests of all our shareholders,” said Michael Jennings, chairman of Parkland’s board of directors. “Parkland’s board and management are aligned in defending the company’s rights and the interests of all its shareholders. We continue to remain open to a constructive resolution with SOL. We are ready to reengage with SOL at any time and are committed to reaching a resolution that maximizes shareholder value, ensures good governance practices, and protects the rights and interests of all our shareholders.”
Parkland has made significant strides on several matters of concern to Simpson Oil, including the transition to its new chairman Jennings and an ongoing board renewal with three recent new director appointments, Parkland said.
Over the past year and a half, Simpson Oil, as well as Parkland shareholder Engine Capital LP, which owns about 2.5% of the company, have voiced several concerns over Parkland Corp.’s business. Engine Capital called on the retailer to sell off its non-core assets in March 2023 (which it later did). Engine Capital in January said it was “very concerned” over the departures of two of Parkland’s board members, who were picked by Simpson Oil. And in April, Simpson Oil called for a strategic review of Parkland and said it should consider selling the company.
Bob Espey has been Parkland's president and CEO since 2011. Former Parkland USA President Doug Haugh left Parkland in December 2022. It later named Donna Sanker as president of its U.S. division and has since expanded her role, combining Parkland’s U.S. and International regions under Sanker.
Pierre Magnan stepped down as president, international of Parkland Corp. following nine years leading the international region.
Parkland Corp. is an international fuel distributor, marketer and convenience retailer with operations in 25 countries across the Americas. It uses the On the Run brand for its c-stores, among other regional brand names from companies it has acquired.
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