U.S. energy giant Sunoco (SUN) has announced that it is buying Canadian gas station operator Parkland (TSE:PKI) in a blockbuster $9.1 billion deal.
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In a joint news release, Sunoco and Parkland said that the acquisition will create the largest independent fuel distributor in the Americas. News of the takeover has sent PKI stock up 8% on May 5, while SUN stock is down 7% in early New York trading.
Parkland operates retail gas stations under the Esso, Ultramar, Chevron, and Pioneer brands. The company holds the rights to the convenience store brand “On the Run” in Canada and the U.S. Parkland is the largest independent fuel retail company in Canada and the second-largest convenience store operator in the country.
Strategic Review
Parkland put itself up from sale following a recent strategic review. The company had been under pressure to increase shareholder value from activist investor Engine Capital, as well as Simpson Oil, its largest stockholder with a nearly 20% stake.
Under terms of the takeover, Parkland shareholders will receive C$19.80 (US$14.33) in cash and 0.295 Sunoco units for each Parkland share they own. For Sunoco, which operates in wholesale fuel distribution and retail gas stations, the purchase of Parkland is its second major deal in recent years. In 2024, Sunoco acquired fuel storage and pipeline operator NuStar Energy for $7.3 billion.
The Parkland acquisition is expected to close in the second half of this year and deliver over $250 million in annual cost savings by the third year following the takeover. Sunoco said the transaction will boost its cash flow by more than 10% and that the two companies will distribute more than 15 billion gallons of fuel annually. SUN stock is up 8% on the year.
Is SUN Stock a Buy?
The stock of Sunoco has a consensus Strong Buy rating among eight Wall Street analysts. That rating is based on six Buy and two Hold recommendations issued in the last three months. The average SUN price target of $64.43 implies 18.22% upside from current levels.
