Simpson Oil’s Governance Battle Threatens $9.1B Parkland-Sunoco Deal

The proposed $9.1 billion acquisition of Parkland Corp (TSX: PKI) by Sunoco LP (NYSE: SUN) has ignited a high-stakes governance clash between activist investor Simpson Oil and Parkland’s board, which critics accuse of “clinging to control” to push through the deal. Simpson Oil, holding nearly 20% of Parkland shares, has launched a fierce campaign to block the transaction, alleging breaches of fiduciary duty, procedural missteps, and a mismanaged partnership that once promised shareholder value.

At the heart of the dispute is Parkland’s abrupt postponement of its annual general meeting (AGM) to June 24, 2025—just days after Simpson nearly secured a boardroom takeover. The original May 6 AGM was to vote on Simpson’s dissident slate of directors, which the activist firm claims had garnered over 60% shareholder support. By delaying the AGM, Parkland’s board sought to coincide the shareholder vote on the Sunoco deal with the director election, a move Simpson calls a “deplorable tactic” to avoid accountability.

Governance vs. Deal-Making: A Clash of Priorities

Simpson’s opposition hinges on two core arguments:
1. Fiduciary Duty Violations: The activist firm asserts Parkland’s board is “already lost the confidence of shareholders” and should not proceed with major decisions—like a $9.1 billion acquisition—before a new board is elected. Simpson has demanded the immediate resignation of all 11 incumbent directors, including Executive Chair Michael Jennings, accusing them of prioritizing control over shareholder interests.
2. Deal Terms Under Scrutiny: While the Sunoco offer represents a 21% premium over Parkland’s pre-announcement stock price, Simpson highlights that Parkland rejected a higher $45-per-share bid from Sunoco in 2023. The current $44-per-share offer (via cash or SunCorp LLC units) is framed as a “material discount” compared to what shareholders could have secured earlier.

The Alberta Court of King’s Bench recently sided with Parkland, dismissing Simpson’s emergency request to reinstate the May AGM. Justice Douglas Mah ruled that shareholders would have “ample time” to review the Sunoco deal before the June vote, calling the delay “not urgent.” This legal setback leaves Simpson’s proxy fight in jeopardy, as the board’s slate and the Sunoco transaction will now be voted on simultaneously.

Deal Structure and Strategic Rationale

The Sunoco-Parkland merger aims to create the largest independent fuel distributor in the Americas, combining Sunoco’s U.S. infrastructure with Parkland’s Canadian and Caribbean assets. Key terms include:
- Consideration: Parkland shareholders may choose between $44 cash per share, 0.295 SunCorp units plus $19.80 cash, or 0.536 SunCorp units.
- Synergies: Sunoco projects $250 million in annual cost savings by Year 3, alongside 10%+ accretion to distributable cash flow.
- Regulatory Commitments: Sunoco pledged to maintain Parkland’s Calgary headquarters, Canadian jobs, and investments in the Burnaby Refinery’s low-carbon fuel projects.

Analysts largely favor the deal, citing its strategic benefits and a $275 million break fee—a steep penalty if the transaction collapses. TD Cowen and ATB Financial have noted that Parkland’s complex asset portfolio (including 4,000 gas stations) makes it a hard-to-replicate entity, leaving few alternatives for shareholders.

Historical Context and Mismanagement Claims

Simpson’s conflict with Parkland spans years, rooted in a 2019 acquisition where Parkland bought 75% of Simpson’s Caribbean fuel subsidiary, Sol, for $1.6 billion. Initially, Simpson praised Parkland’s leadership, but by 2025, it accused the board of mismanaging the partnership, eroding its original value. The activist firm’s Refuel Parkland campaign underscores its belief that Parkland’s strategic direction under current management has failed shareholders.

The Path Forward: Legal and Shareholder Hurdles

The deal still requires:
- 66⅔% shareholder approval, a high bar given Simpson’s opposition.
- Regulatory clearances, including Canada’s Investment Canada Act and U.S. antitrust reviews.
- Proxy battle resolution: If the June AGM proceeds as planned, shareholders will decide both the Sunoco deal and the board’s composition in one vote—a move critics argue stacks the deck in Parkland’s favor.

Conclusion: A Deal on the Brink?

Despite Simpson’s aggressive stance, the Sunoco deal appears likely to proceed, barring a shareholder revolt or regulatory stumble. Key factors tilting in Parkland’s favor include:
- Analyst consensus: Over 80% of analysts rate the deal as “buy” or “strong buy,” citing synergies and the lack of viable alternatives.
- Financial incentives: The 21% premium and SunCorp’s liquidity options appeal to shareholders, even if the terms are inferior to the rejected 2023 offer.
- Legal support: The court’s dismissal of Simpson’s emergency motion undermines its narrative of procedural unfairness.

However, Simpson’s 20% stake and the board’s governance controversies create uncertainty. If the activist firm can sway additional shareholders to its “GOLD” proxy card, the vote could shift. Yet with Parkland’s shares rising 7% on the deal announcement and the break fee acting as a deterrent to walkaways, the odds favor closure by year-end 2025.

For investors, the decision hinges on weighing governance risks against the deal’s financial terms. While Simpson’s claims of mismanagement resonate, the merger’s strategic value and the board’s unified support suggest shareholders may prioritize short-term gains over long-term control battles.