U.S. Singer’s Elliott Scores Victory as Suncor Explores Retail Sale

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Suncor Energy Inc. will review its retail business for a possible sale and add three new directors as part of a deal with Elliott Investment Management LP, bowing to pressure from the activist investment firm.The revised board will form a committee to oversee the review of the downstream assets, Calgary-based Suncor said Monday in a statement. The retail group includes one of Canada’s largest networks of gas stations with convenience stores attached — more than 1,500 locations operating under the Petro-Canada brand.The moves represent the biggest shakeup in years at Calgary-based Suncor and a clear victory for Elliott, which made a public demand in April for changes to the board and for a strategic review. The investment firm founded by Paul Singer has been critical of Suncor’s safety record, as numerous fatal incidents have contributed to lost oil production and weak returns compared with other Canadian oil sands producers.Suncor rose 2.5% to C$40.31 at 12:12 p.m. in Toronto, bringing its gain this year to 27%.

The new directors include former Talisman Energy Inc. executive Jackie Sheppard, ARC Financial Corp. partner Chris Seasons and former BHP Group Ltd. executive Ian Ashby. Sheppard and Seasons will participate in the group doing the retail review, as well as the search committee for a new chief executive officer.

Mark Little, the company’s previous chief executive officer, departed on July 8 after a worker died at Suncor’s Base Plant mine in northern Alberta. Suncor has installed Kris Smith, executive vice president for downstream operations, as interim CEO while it searches for a permanent replacement.

Elliott wants to see a CEO brought in from outside the company, according to a person familiar with the matter, speaking on condition of anonymity because the discussions are private. The agreement between Suncor and Elliott allows the investment firm to receive information on the CEO search.

Retail Sale

The network of gas stations could bring after-tax proceeds of C$7.7 billion to C$8.9 billion ($6 billion to $6.9 billion), Credit Suisse analyst Manav Gupta said in a note. That money could be used by Suncor to increase its stake in the Fort Hills oil project, Gupta wrote.

But the sale price could be affected by the fact that there are only two logical buyers in Canada — Parkland Corp. and Alimentation Couche-Tard Inc. — and private equity firms would face challenges with making a debt-heavy purchase in a period of rising interest rates, Brompton Funds Ltd. Chief Investment Officer Laura Lau said by phone Monday.

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“If you buy gas stations, how long do you think people will be pumping gas? That’s the big question,” Lau said, noting the Canadian government has long-term plans to ban the sale of cars and trucks with internal combustion engines in a push for more electric vehicles.

“Does Couche-Tard or Parkland want to double down, or will they get a better price?” she said.

Elliott has the right to add a fourth director to the board “if certain performance criteria relative to peers are not met” by the end of the year, according to the statement.

“As a significant investor, we look forward to continuing to work constructively with Suncor as it takes important steps to achieve best-in-class safety, improve operations and restore its industry leadership,” Elliott Partner John Pike and Portfolio Manager Mike Tomkins said in the statement.

(Updates share price and adds additional information on CEO search and retail sale)

–With assistance from Danielle Bochove and Simon Casey.