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US oil and gas group Sunoco has struck a $9.1bn deal to buy Canadian rival Parkland in a cross-border transaction that will create the biggest fuel distributor in the Americas during a sensitive time for relations between the two countries.
Under the terms of the deal announced on Monday, Parkland shareholders will receive C$19.80 ($14.32) a share and the remainder in Sunoco stock, equivalent to about one Sunoco share for every 3.4 Parkland shares. The takeover values Parkland at a 25 per cent premium to the average share price over the past seven days.
The takeover comes as US President Donald Trump’s tariff policy and promises to wean the country off reliance on Canadian oil and gas exports have strained relations with Canada.
Trump’s rhetoric about turning Canada into the 51st US state spurred a Liberal party comeback, which delivered Mark Carney a victory in last week’s Canadian general election.
Sunoco’s deal to buy Parkland is the largest potential takeover by a US company since Ottawa reformed its investment rules in March to protect Canadian companies from foreign influence, giving the government more power to block takeovers if they threatened to undermine Canada’s economic security.
Sunoco stressed its ongoing commitment to Canada in a nod to the political sensitivities surrounding the deal, promising to maintain a headquarters and large workforce in Calgary and to continue investment in Parkland’s vast low-carbon fuels refinery in Burnaby, British Columbia.
The deal, which would close in the second half of this year, was unanimously recommended by Parkland’s board. Michael Jennings, Parkland’s executive chair, said the board recognised “Sunoco’s commitment to safeguarding Canadian jobs, retaining the Calgary head office, and further investing in Canada”.
Last month US parcel giant UPS said it would buy Canada’s Andlauer Healthcare Group in an all-cash deal worth $1.6bn.
Canada, which has the world’s third-largest oil reserves, is the biggest foreign supplier to the US, accounting for about 60 per cent of its oil imports. These have become increasingly important to ageing US oil refineries, which were built to handle heavier grades of crude.
Sunoco’s proposed acquisition of the Canadian fuel company drew criticism from its largest shareholder, Simpson Oil, which accused Parkland’s board of deliberately delaying a shareholder meeting this week to discuss a boardroom overhaul.
Parkland has rescheduled the shareholder meeting for June 24, when shareholders are now expected to vote on the Sunoco takeover.
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“Delaying the meeting and pushing forward with any transaction ahead of board transition represents a clear breach of fiduciary duty — an obvious attempt to cling to power and sidestep shareholder will,” said Simpson, which owns just under 20 per cent of Parkland.
The Parkland deal is Sunoco’s second large acquisition in recent years.
Last year, it struck a $7.3bn all-stock deal to buy pipeline and fuel storage company NuStar Energy in a move to expand up the energy supply chain. At the same time Sunoco, which is a prominent sponsor of Formula 1 and NASCAR racing in the US, also sold 204 retail stores to 7-Eleven owner Seven & i for slightly less than $1bn. Shares in Sunoco fell by more than 5 per cent to $54.90 when trading opened in New York, while Parkland stock jumped almost 8 per cent to C$39.15 on the Toronto Stock Exchange.
