The Haslam family is out of Pilot Travel Centers.
The legal battle between the Haslams and Berkshire Hathaway (NYSE: BRK.B) over the travel centers’ valuation was settled last week, the truce announced the day the case was to go to trial in Delaware Chancery Court. With that compleeted, the founding family exercised its “put option,” which required Berkshire to buy the 20% of PTC it did not already own.
The two companies announced the transaction late Tuesday.
“Pilot started with one gas station 65 years ago, and because of the dedicated and exceptional
team members we have had throughout our history, it is now an industry leader,” Jim
Haslam II, PTC founder, said in a prepared statement announcing the 20% sale. “While this has certainly been an emotional decision for us, it is one we felt was right for our family at this time. We look forward to continuing to support our life-long home of Knoxville, Tennessee, and to furthering our deep commitment and philanthropy throughout the region that we all love.”
The put option, also referred to as a “put right,” could first be exercised this year. It needed to be exercised within 60 days of the close of the PTS fiscal year — Dec. 31 — or it would roll over to 2025.
Berkshire first took a 38.6% stake in Pilot in 2017. At the time of the sale, a pathway to Berkshire buying the rest of Pilot was laid out. The first stake sold for $2.76 billion; the second sale for an additional 41.4% stake was completed a year ago for $8.2 billion, giving Berkshire Hathaway control.
The price for exercising the final 20% was not revealed.
The 2017 price of $2.76 billion for 38.6% of the company would have put an enterprise value on Pilot of approximately $7.1 billion. The $8.2 billion sale a year ago for 41.4% would have set the enterprise value at approximately $19.8 billion.
To show the sheer difference in the size and valuation of PTC over its theoretically larger rivals, the cost to acquire Travel Centers of America by BP was announced in February at approximately $1.3 billion. The second-largest chain, Love’s, is private and no information about its enterprise value is known.
In their announcement of the deal, the Haslams said Pilot had more than 750 locations across 44 states and six Canadian provinces. It sells about 14 billion gallons of fuel a year and $3 billion in food and merchandise. It also was described as the fifth-largest private company in America before the Berkshire Hathaway acquisition.
The valuation of the final 20% of PTC was the key point of contention between the two sides in the months leading up to the time when the put option could be exercised.
Berkshire Hathaway’s internal processes implemented “pushdown accounting” for PTC after its takeover in early 2023. The Haslams said that was going to hurt the valuation of PTC when it came time to have its final 20% bought out. But even in the Haslams’ later litigation, it was reported that Berkshire Hathaway CEO Warren Buffett had told Jim Haslam II that the original terms of valuing PTC would be honored when the time came for the final fifth to be sold to Berkshire.
In their initial lawsuit, the Haslams said the original agreement between Berkshire and the PTC owners was that the valuation for the final 20% “would be determined by the same formula for valuing PTC used to set the price for Berkshire’s initial investment.”
The Haslams apparently did not think that assurance by Buffett was adequate and launched the legal battle in Delaware Chancery Court. That resulted in counterclaims by Berkshire that former Pilot CEO Jimmy Haslam III, son of the founder, had launched a surreptitious effort to influence decision-making within PTC from Haslam family loyalists that would increase the short-term valuation of the company while potentially damaging it long term.
Ultimately, as a spokeswoman for the Haslams noted, all claims and counterclaims were dismissed in the settlement earlier this month.
More articles by John Kingston
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