Suncor owns Petro-Canada, a gas station chain with approximately 1,600 locations. (Photo by Artur Widak/NurPhoto via Getty Images)
Suncor Energy ( SU.TO )( SU ) could receive as much as $8.9 billion after taxes for its network of retail gas stations, according to one estimate, as the company bows to activist calls to reconsider a potential sale.
The Calgary-based energy giant announced Monday that it has reached a deal with Elliott Investment Management. In April, the Florida-based hedge fund went public with requests for a strategic asset review and changes to Suncor’s board, following deadly safety accidents and financial results that lagged rivals.
On July 8, CEO Mark Little announced he was leaving the company. His departure came a day after the death of a worker at Suncor’s Base Plant mine in northern Alberta. Suncor has named Chris Smith, executive vice president of downstream operations, as interim CEO while the company searches for a permanent replacement.
Elliott’s plan, as posted on the RestoreSuncor.com website, promises to “unlock” more than $30 billion in shareholder value. On Monday, Suncor agreed to add three new directors and form a committee to oversee a strategic review of the downstream business.
Suncor owns Petro-Canada, a chain of gas stations with roughly 1,600 locations that Elliott believes would command a hefty sales price from a strategic buyer. According to Credit Suisse, Suncor’s downstream retail business will provide pre-tax proceeds of $9.6 billion to $11.2 billion and after-tax cash receipts of $7.7 billion to $8.9 billion.
“We see an opportunity, like Marathon Petroleum, for Suncor to sell its retail business,” analyst Manav Gupta wrote in a note to clients on Monday. “We believe the primary use of the proceeds could be to support higher shareholder returns, as was the case with proceeds from the sale of Speedway to Marathon.”
Seven & i Holdings Co., the world’s largest convenience store operator, has agreed to buy Marathon’s gas station business for $21 billion in 2020, adding nearly 4,000 locations to its North American network.
Like Suncor, Ohio-based Marathon has faced pressure from Elliott, which has called for productivity improvements and a sale of its retail business.
The story continues
Toronto-listed Suncor shares added 1.91% to $40.07 at 12:33 p.m. ET. The stock is up about 24 percent since the start of the year.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
Download the Yahoo Finance app, available for Apple and Android.
Add Comment