One of North America's most aggressive activist investors has set its sights on Suncor Energy Inc., seeking an overhaul of the company's board and management team, along with the possible sale of Petro-Canada.
In a letter to Suncor's board on Thursday, U.S.-based Elliott Investment Management expressed frustration in what it calls a recent decline in performance at the energy producer.
“It is evident that Suncor’s status quo is not working,'' Elliott partner John Pike and portfolio manager Mike Tomkins wrote in their letter.
“Shareholders have seen their investment lag behind nearly all large-cap North American oil and gas companies, as Suncor's share price has remained virtually unchanged since early 2019, even as oil prices have climbed to their highest level in almost a decade.”
Suncor, which was the most valuable Canadian energy company by market capitalization from 2000 until 2018, has been in a slump recently. Elliott's letter points out the company's share price has lagged that of its closest oilsands peer, Canadian Natural Resources Ltd., by 137 per cent over the last three years.
The company has also been plagued by a recent spate of operational difficulties – missing its corporate production guidance due to equipment failure and cold weather – as well as significant workplace safety concerns. Since 2014, there have been 12 workplace deaths at Suncor sites, which Elliott said is more than all of the company's closest peers combined.
In their letter, Pike and Tomkins said all of these problems have roots in what they called Suncor's ``slow-moving, overly bureaucratic corporate culture.”
Elliot Investment Management is a well-known activist investor with approximately US$51.5 billion of assets under management. It has previously targeted large corporations such as AT&T, Hyundai, and Softbank.
It holds a 3.4 per cent economic interest including shares and cash-settled derivatives contracts in the Calgary-based company.
In its letter, Elliott laid out its proposal for Suncor, which includes adding five new independent directors to the company's board and then undertaking a strategic review of Suncor's executive management team, including CEO Mark Little.
It also wants Suncor to explore opportunities to “unlock the value'' outside of its core oilsands business. Possibilities could include the potential sale or spinoff of Suncor's Petro-Canada 1,800-location retail network.
On Thursday afternoon, Suncor issued a statement in which it said it remains confident in the company's strategy, but will take the time to carefully assess Elliott's proposals.
“Suncor's board and management team looks forward to engaging with Elliott in due course to better understand their perspective,'' said Suncor spokeswoman Sneh Seetal in the statement.
In their letter, Pike and Tomkins said they look forward to engaging with the board, along with their fellow shareholders, and hoped to meet with the board as soon as possible.
Suncor's share price closed up $5.07, or 12 per cent, to $47.22 Thursday on the Toronto Stock Exchange.
Elliott said it believes its proposal for Suncor could result in a share price of $60 or higher, a roughly 50 per cent increase in shareholder value.
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