CALGARY 鈥� Tensions between Parkland Corp. and Simpson Oil, its largest shareholder, continue to escalate, with the Cayman Islands-based Simpson announcing this week it has launched a lawsuit against the fuel retailer.
Simpson Oil, which owns about 20 per cent of the Calgary-based Parkland's shares, said Tuesday it is taking legal action after what it called Parkland's effort to "insulate indefinitely its board of directors and chief executive officer from accountability to Parkland's shareholders."
Simpson is asking the Ontario Superior Court of Justice to overturn a set of voting restrictions that are part of a 2019 board governance agreement between Simpson and Parkland.
At the time, Simpson agreed to a range of provisions aimed at ensuring it would not be able to exercise undue influence and control over Parkland in pursuing its own interests.
The agreement prevents Simpson from voting against the board or any of its recommendations provided its ownership in Parkland is above five per cent. It also prohibits Simpson Oil from soliciting or making its own bid for Parkland.
But Simpson said Tuesday it agreed to those provisions when it was confident in Parkland's senior management team. It said there has since been "significant churn" in the company's higher ranks and alleges the company's performance has suffered.
"Simpson Oil remains committed to protecting shareholder rights for the benefit of all shareholders, and will hold Parkland's board and chief executive officer accountable for the proper exercise and performance of their duties," Simpson said in news release.
The lawsuit marks the latest development in what has been a months-long dispute between Parkland and its largest shareholder.
Last December, two Simpson-nominated directors resigned from the board. Simpson has also called on Parkland to conduct a strategic review that would include the consideration of a possible sale of the company.
Another shareholder, activist investor Engine Capital LP, has urged Parkland to sell or spin off its Burnaby, B.C., refinery 鈥� a call Parkland's board has rejected.
On Tuesday, Parkland said it is disappointed with Simpson's move, adding Parkland has worked in "good faith" to resolve the disagreement outside of the courts.
"Parkland has worked tirelessly to resolve differences with (Simpson) whose latest actions indicate they are seeking greater influence over our board than we believe is in the best interests of all our shareholders," said Parkland board chair Michael Jennings in a release.
Parkland remains open to a constructive solution with Simpson, Jennings added.
Simpson Oil is the previous owner of Caribbean fuel retailer Sol, which was acquired by Parkland. Simpson has been a Parkland shareholder since 2017.
In addition to its Burnaby refinery, Parkland operates approximately 4,000 fuel and convenience retail stores and commercial locations across Canada, the United States and the Caribbean.
This report by The Canadian Press was first published Aug. 14, 2024.
Companies in this story: (TSX:PKI)
Amanda Stephenson, The Canadian Press
