Remember back in March, when Canadian oil stock Parkland (TSE:PKI) started up a “strategic review” of its options? Well, it seems to have found one strategic option that worked great: a complete sell-off. Now, Sunoco (SUN) is Parkland’s new owner, once the dust settles on a recent deal. That move sent Parkland shares surging, as investors added over 6% to Parkland shares in Monday morning’s trading.
The deal features Sunoco buying Parkland for around $9.1 billion, including debt. This would ultimately make the combined entity the “largest independent fuel distributor in the Americas.” Parkland shareholders would come out quite a ways ahead here, landing C$19.80 per share in cash, and 0.295 Sunoco shares for every share of Parkland besides.
This is not the first time Sunoco has made a big deal, either; last year, it picked up NuStar Energy, dropping $7.3 billion to make that happen. But Sunoco made the deal for a sound enough reason, reports note; the transaction is expected to up Sunoco’s cash flow by over 10%, and get Sunoco back to targeted debt levels in somewhere between 12 and 18 months. The deal should close in the second half of 2025, and offer up $250 million in cost savings annually by the end of the third year.
A Win for Simpson…Sort Of
With this news in place, perhaps the biggest winner is Simpson Oil, who owns around 20% of Parkland. Simpson has been one of the biggest activist investors pushing Parkland’s direction, though Engine Capital reportedly also had a hand in moving the needle on that one.
In fact, reports noted that Simpson Oil had largely won a boardroom battle at Parkland, with Tuesday’s annual meeting likely to see a slate of its own members added to Parkland’s board. Though with Sunoco buying the place outright, just how much impact the Parkland board will even have remains to be seen, depending on the terms of the agreement with Sunoco.
Is Parkland Stock a Good Buy Right Now?
Turning to Wall Street, analysts have a Strong Buy consensus rating on Parkland stock based on seven Buys assigned in the past three months, as indicated by the graphic below. After a 1.13% loss in its share price over the past year, the average PKI price target of C$46.57 per share implies 20.59% upside potential.
