Suncor owns Petro-Canada, a gas station chain of approximately 1,600 locations. (Photo by Artur Widak / NurPhoto via Getty Images)
Suncor Energy (SU.TO) (SU) could receive up to $ 8.9 billion after taxes for its retail gas station network, according to an estimate, as the company yields to an activist’s call to review a possible sale.
Calgary energy giant announced Monday that it has reached an agreement with Elliott Investment Management. In April, the Florida-based hedge fund went public with demands for a strategic asset review and changes to Suncor’s board, following deadly security and financial performance setbacks that were left behind.
On July 8, CEO Mark Little announced he would leave the company. His departure came a day after a worker died at the Suncor Base Plant mine in northern Alberta. Suncor has selected Kris Smith, executive vice president of downstream operations, as interim CEO while the company seeks 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 its subsequent business.
Suncor owns Petro-Canada, a gas station chain of approximately 1,600 locations that Elliott believes would draw a high selling price from a strategic buyer. According to Credit Suisse, Suncor’s downstream retail business would have pre-tax revenue of $ 9.6 billion to $ 11.2 billion, and after-tax cash revenue of $ 7.7 billion to $ 8.9 billion.
“We see the possibility that, like Marathon Petroleum, Suncor will end up selling its retail business,” analyst Manav Gupta wrote Monday in a note to clients. “We believe the primary use of revenue could be to support greater profitability for shareholders, as was the case with the proceeds from the sale of the Marathon Speedway.”
Seven & i Holdings Co., the world’s largest convenience store operator, agreed to buy Marathon’s gas station business for $ 21 billion by 2020, adding nearly 4,000 locations to its U.S. network.
Like Suncor, Ohio-based Marathon faced pressure from Elliott, who called for performance improvements and the sale of its retail business.
The story goes on
Shares of Suncor listed on Toronto rose 1.91 percent to $ 40.07 at 12:33 pm ET. Shares have risen about 24 percent to date.
Jeff Lagerquist is a senior journalist for Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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