An activist investor that pushed for changes at Parkland Corp. earlier this year is making new recommendations such as prioritizing share buybacks.
In a letter to the Parkland board on Tuesday, Engine Capital commended the company on the work it has done so far including changes at the board and plans to sell non-core assets.
However, Engine Capital says Parkland remains undervalued and wants to see the company take further steps including refining the company’s capital allocation, better align management compensation with shareholders’ interests and simplify its operations.
“While we are encouraged by recent value-enhancing actions leadership has taken, we firmly believe additional steps need to be taken,” Engine Capital managing partner Arnaud Ajdler and partner Brad Favreau wrote in the letter.
“We look forward to expanding our ongoing dialogue with the board and management to help increase long-term value for the benefit of all Parkland stakeholders.”
Engine Capital is calling on the company to allocate a total of around $800 million for share repurchases in 2024 and 2025 with repurchases front-loaded in 2024 to take advantage of the stock undervaluation.
It also suggests Parkland pay down debt over the next two years by a total of around $600 million primarily using proceeds from asset sales.
Engine Capital says it owns about a 2.5 per cent stake in Parkland.
Parkland is scheduled to host an investor day on Nov. 14 when it will provide an update on its strategy, capital allocation framework and financial outlook.
“Parkland looks forward to sharing further updates on our future growth plans and capital allocation priorities with all our shareholders during our upcoming investor day,” Simon Scott, Parkland’s director of communications, said in a statement.
Scott noted the company increased its 2023 guidance for adjusted earnings before interest, taxes, depreciation and amortization earlier this month and moved up its adjusted EBITDA target of $2 billion to 2024, a year earlier than expected.
This report by The Canadian Press was first published Sept. 26, 2023.