Under the terms of the letter of intent filed yesterday with the U.S. Bankruptcy Court [image-nocss] in Delaware, the value indicated would allow all Flying J creditor obligations to be paid in full. Pilot has also agreed to provide $100 million in Debtor-in-Possession (DIP) financing for Flying J's operations, subject to court approval and various conditions.According to The Wall Street Journal, citing a court filing outlining the deal, Flying J will receive a stake in Pilot plus $300 million to $500 million in cash. The equity portion of the deal will be based on an enterprise value for Pilot of $3.3 billion and for Flying J $1.2 billion.
Pilot is requiring Flying J to obtain bankruptcy court approval of the letter of intent and the loan by July 31. Flying J is asking Judge Mary F. Walrath of the U.S. Bankruptcy Court to consider approval of the Pilot deal at a July 30 hearing, said the Journal."After a careful and exhaustive review of the alternatives available, we have concluded that a merger with Pilot represents the best possible outcome for Flying J, our creditors, our customers, and our employees," said Crystal Call Maggelet, chairman of Flying J. "Over the next few months, we will negotiate definitive agreements to merge our companies. This transaction will allow us to emerge from the bankruptcy process relatively quickly thereafter and to start a new chapter in the Flying J story."
Jimmy Haslam, CEO of Pilot, said, "We believe that by combining Flying J and Pilot we will better serve our customers by more efficiently providing them with the products and services they need. We look forward to working closely with Flying J and its employees during the Chapter 11 emergence process, and as we take the next steps of a new beginning for both of our companies."
The preliminary merger agreement with Pilot pertains specifically to Flying J's core travel plaza business, and it excludes Longhorn Pipeline, Big West Oil, Flying J Oil & Gas, Haycock Petroleum and Transportation Alliance Bank. Flying J is in the process of pursuing or evaluating alternatives for each of these other businesses.
Flying J filed for Chapter 11 protections on Dec. 22, 2008, after a precipitous drop in oil prices and disruption in the credit markets brought to bear significant short-term pressure on the company's liquidity position.
Ogden, Utah-based Flying J operates more than 240 retail locations, including travel plazas, convenience stores, restaurants, motels and truck service centers in 41 states and six Canadian provinces. In addition to the usual truckstop services such as food, diesel and gasoline and showers, the company offers banking, bulk fuel programs, communications (WiFi) fuel cost analysis insurance and truck fleet sales. It also explores for, refines and transports petroleum products. It is among the 20 largest private companies in America, with 2007 sales exceeding $16 billion. This fully integrated oil company employs approximately 14,700 people in the United States and Canada.
Pilot is the nation's largest retail operator of travel centers, catering to the professional driver and traveling motorist in 41 states with more than 300 retail interstate properties. The company is headquartered in Knoxville, Tennessee and employs 13,000 nationwide.
Click herefor previous CSP Daily News coverage of Flying J.
Andclick here for previous coverage of Pilot.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.