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Investing.com -- Calgary-based Parkland Corp. (PKI) is set to be acquired by U.S. company Sunoco L.P. for a total of US$9.1 billion in cash and stock. The announcement was made on May 5, 2025. The acquisition is subject to approvals from shareholders and regulators.
In response to the proposed deal, S&P Global Ratings has placed its ’BB’ issuer credit rating on Parkland and ’BB’ issue-level rating on Parkland’s senior unsecured debt on CreditWatch. The CreditWatch placement indicates a potential increase in the issuer credit rating and senior unsecured issue-level ratings to align Parkland’s ratings with those of Sunoco.
The CreditWatch status is expected to be resolved once the transaction is finalized, which is likely to occur in the second half of 2025.
The merger with Sunoco is projected to enhance scale, diversity, and asset footprint. Sunoco’s plan is to acquire 100% of Parkland, which is expected to be viewed as a core part of the Sunoco group. Consequently, S&P Global Ratings will likely equalize its ratings on Parkland with those on Sunoco.
The acquisition and integration of Parkland into Sunoco are expected to nearly double the combined entity’s EBITDA. The merged company will become the largest independent fuel distributor in North America, distributing approximately 56 billion liters of fuel. This is double Parkland’s stand-alone fuel volumes of 25 billion liters.
The merger will also considerably enhance scale and geographic diversity and significantly improve its portfolio of assets. Post-acquisition, Parkland will have access to Sunoco’s extensive 14,000 miles of fuel pipeline infrastructure.
Parkland Canada will also support Sunoco’s business profile with its fuel distribution business, presence in the Caribbean region, and refinery segment. The management team anticipates realizing cost synergies of about US$250 million in the third year after the close, primarily from supply chain optimization and other operating efficiency initiatives.
S&P Global Ratings-adjusted leverage is projected to be maintained in the 4.5x-4.8x range following the closing of the acquisition through 2026, before decreasing to under 4.5x in the second half of 2027.
The CreditWatch placement reflects the potential for S&P Global Ratings to raise the issuer credit rating and senior unsecured issue-level ratings by one notch to align the ratings on Parkland with those on Sunoco. Once the proposed acquisition is closed, S&P Global Ratings will likely raise its ratings on Parkland by one notch and likely withdraw its ratings.
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