Bob Espey, at the M&M Food Market head office in Mississauga on Nov 29, 2022, will retire as Parkland CEO by the end of the year.Fred Lum/the Globe and Mail
Parkland Corp. PKI-T chief executive officer Bob Espey will retire by the end of the year as part of the fuel distributor’s attempt to defuse an activist campaign launched by its largest investor.
On Wednesday, Calgary-based Parkland announced Mr. Espey, who has run one of the country’s largest gas station chains for 15 years, will step down on Dec. 31 or at the conclusion of a strategic review that began last month, a change in leadership demanded by 19.8-per-cent shareholder Simpson Oil Ltd.
Parkland chair Michael Jennings, who joined the board last year, assumed the role of executive chair, effective immediately. The company has launched a search for a new CEO. Mr. Jennings previously ran a Dallas-based fuel refiner, HF Sinclair Corp.
“Over the past few months, it became clear that stepping down and announcing my departure may help bring resolution to the situation with Simpson and benefit all shareholders,” said Mr. Espey, 59, in a press release.
“Bob has led Parkland through a period of exponential growth, transforming the company from a small regional fuel retailer into one of Canada’s leading fuel and convenience retailers,” Mr. Jennings said. “We thank him for his unwavering commitment and dedication.”
Parkland executives spent last week meeting with more than 20 institutional shareholders. In an interview, Mr. Jennings said the leadership changes signal “the board is listening, and taking the necessary steps to regain the confidence of all shareholders.”
Simpson Oil’s campaign for change at Parkland is based on stock market performance the Cayman Islands-based company said lags industry peers, along with disappointing growth in Parkland’s earnings before interest, taxes, depreciation and amortization (EBITDA) compared to other gas station chains.
On Wednesday, Parkland announced a $55-million charge against its earnings as it exited a carbon credit trading business. The company forecast earnings (EBITDA) in 2025 will be at the low end of its previously disclosed target of $1.8-billion to $2.1-billion.
Parkland runs 4,000 gas stations – including brands such as Esso, Chevron, Ultramar and Pioneer – and electric-vehicle charging terminals across Canada, the United States and the Caribbean, along with On the Run convenience stores and the M&M Food Market chain. The company also owns a refinery in Burnaby, B.C.
Last month, Parkland launched a strategic review of the business that includes the potential sale of assets or the entire company, a process Simpson Oil has been pushing for since last year.
Simpson Oil became a significant shareholder in Parkland after selling the company its Caribbean gas station chain in two transactions worth a combined $2.35-billion in 2018 and 2022. Earlier this year, Simpson Oil won a court case over its right to launch an activist campaign.
On Tuesday, Simpson Oil published a presentation that called on Parkland’s board to hold Mr. Espey accountable for a “flawed strategic focus, failed growth plan, and bloated corporate culture [that] have led to significant underperformance.”
Simpson Oil has nominated nine directors for Parkland’s 13-member board ahead of the company’s annual meeting on May 6. Simpson Oil, a family-owned company controlled by billionaire Kyffin Simpson, said if its slate is elected, “on day one, we will begin the process of recruiting a new CEO.”
Simpson Oil put forward one of its nominees for the board, former Chemtrade Logistics Income Fund CEO Mark Davis, as a potential interim CEO at Parkland.
Parkland has included three of Simpson Oil’s nominees on its slate of 13 directors for the annual meeting.
“The key consideration going forward is whether the Bob Espey resignation is enough to bring the Simpsons and Michael Jennings’s board back to the negotiating table,” analyst Ben Isaacson at Bank of Nova Scotia said in a report Wednesday.
Mr. Isaacson said Parkland’s decision to change leaders shows the board is responding to shareholder issues, which may open the door to resolution of the boardroom battle. However, the analyst said Simpson Oil may press on with their slate of directors because, “the momentum is on their side, why stop here?”
During the summer of 2023, Parkland rebuffed a $45-a-share takeover offer worth nearly $8-billion from Texas-based Sunoco LP. The company now has a $5.7-billion market capitalization.
Mr. Espey, a former officer in the Canadian navy, joined Parkland in 2008 and was appointed CEO three years later. He built the company through a series of acquisitions, including the $965-million takeover of Ultramar’s Canadian gas stations in 2016, the $1.5-billion purchase of Chevron Canada’s fuel business in 2017 and the Simpson Oil transactions.
link
