Parkland Corp. Shareholder Repeats Call for Change

CALGARY, Alberta — Activist investor Engine Capital LP put Parkland Corp. on notice via an April 20 letter to the board of directors: it intends to withhold support on all incumbent directors at Parkland's 2024 annual meeting.

The shareholder, which owns approximately 2 percent of Parkland's outstanding shares, revisited the letter it sent to Parkland's board in March, which detailed concerns regarding what it called the company's "chronic underperformance" and the need to enhance long-term shareholder value through possibilities like the sale or spinoff of noncore assets, or the sale of the entire company to either private equity or strategic buyer.

Engine Capital also sought to improve Parkland's compensation framework and refresh the board by adding directors with convenience merchandising and capital allocation experience.

The investor, a value-oriented special situations fund that invests both actively and passively in companies undergoing change, reported that Parkland met its request for a meeting with the board by offering a meeting with Parkland Chief Financial Officer (CFO) Marcel Teunissen, which occurred March 30.

"As of today, we still have yet to hear back about a meeting with Parkland's directors. Engine has engaged with more than 50 boards of directors over the last decade, and we have never encountered a situation where one has been so unresponsive," the letter stated. "The response from an engaged and competent board of directors should be to engage with a major shareholder, not to hide behind its CFO."

Engine criticized Parkland's "lack of responsiveness and sense of urgency," claiming it strongly contrasts with shareholders' frustration and desire for change, as evidenced by a nearly 10 percent increase in the company's share price following the release of its previous letter on March 22.

"The fact that the mere possibility of a change in strategy suggested by a significant shareholder could cause this type of positive price movement speaks volumes to shareholders' frustration with the status quo and desire for change," it continued.

Engine sharply criticized the decision of board chairman Jim Pantelidis, who has served for 24 years, to not step down at the upcoming annual meeting of shareholders and instead continue to serve for another three years, noting that Parkland recently adopted a tenure policy that limits a director's tenure to 10 years.

"This policy should apply to all directors, including the company's chairman, especially considering that he has been on the board for almost a quarter of a century. Clearly an orderly transition and appropriate succession planning can take place much faster," the letter continued. "The fact that the board is suggesting Mr. Pantelidis needs to remain as chairman for another three years in order to effectuate a smooth transition is another example of the board's complete lack of urgency. We therefore urge the board not to re-nominate Mr. Pantelidis at the 2024 annual meeting."

Additionally, Engine stated it continues to be concerned by Parkland's compensation practices, particularly the targets set by the board and the total direct compensation of CEO Robert Espey, which has increased as Parkland's business has grown more complex.

"While it is our desire to work constructively with Parkland's board on behalf of all shareholders to unlock value, we must make abundantly clear our dissatisfaction with the status quo, which is why we intend to withhold support on all the incumbent directors standing for re-election at the company's annual meeting," Engine wrote. "As a matter of clarification, Engine intends to vote for the two new nominees appointed by Simpson Oil Ltd."

Engine concluded the letter by stating it intends to closely monitor developments at Parkland and not hesitate to take any actions it believes are necessary to protect the best interests of all shareholders and stakeholders.

Calgary-based Parkland Corp. is an independent supplier and marketer of fuel and petroleum products, and a convenience store operator. Parkland operates approximately 4,000 retail and commercial locations, servicing customers across Canada, the United States, the Caribbean region and the Americas.