To help Flying J meet operating expenses until [image-nocss] the two companies can merge, Pilot would provide the company with $100 million in "post petition" financing to help it emerge from Chapter 11 bankruptcy protection, the report said. Flying J would have minority shareholder and other rights with Pilot and would have one year in which it could purchase up to $200 million in additional equity in Pilot.
Flying J, which filed for bankruptcy Dec. 22, 2008, in U.S. Bankruptcy Court in Delaware, has asked the court to set a 3:00 p.m. July 30 hearing date on a motion seeking court approval for its plans. Flying J Inc. also asked the court to set a July 23 deadline for any parties to file responses to the motion.
As part of the pre-merger agreement, Pilot Travel Centers would be given a time period in which it has exclusive rights to buy Flying J assets, including its travel centers, corporate headquarters, trucking operations and some other properties and business operations. Court documents detail a timeline for this to happen, with 5:00 p.m. August 31 being the earliest date, depending on when Pilot notifies Flying J in writing that it has completed due diligence on Flying J's assets and operations.
Other dates ending the exclusivity period would be September 30, October 31 or March 31, depending on when due diligence is completed, said the report. After this phase is accomplished, the companies would begin merger proceedings.
The resulting company would be a multi-billion-dollar operation with 550 locations in more than 40 states and Canada. By comparison, TravelCenters of America had 233 travel centers in 2007 after announcing it had added 69 travel centers acquired from Petro Stopping Centers to its own 164.
Also as part of the agreement, Pilot would acquire Flying J's corporate headquarters in Ogden, Utah, including the buildings and operations. Headquarters of the two companies would be consolidated in Knoxville, Tenn.
Despite the dominance that the merged Pilot and Flying J operations will have in the travel center market, antitrust issues are not likely to be involved, Dr. Mark Burton, director of transportation economics with the University of Tennessee Center for Transportation Research, told the newspaper.
Burton said that while the merger is a major development nationally, it probably will not have a great effect locally. "I don't see this as having a major impact at any fuel prices at specific locations, even though we have two large firms merging," he said. "Fuel prices are so localized. If you have two of three different sellers within a two- or three-mile distance, that is more of a factor."
Jay Thompson, president of Denver-based consultancy Transportation Business Associates, said in an independent report at Gerson Lehman Group, "The issues to watch are diesel pricing, as we expect to see retail pricing (and margins) to increase with the combined entity. This will be good news for the truckstop chains, not as good for truckers. Also, we expect to see an advantage for Ceridian Corp.'s Comdata, as the Flying J financial services fuel card competitor TCH will not be included in the sale, and will most probably be marginalized."
Although the Tennessee attorney general and the U.S. Department of Justice are charged with reviewing mergers for violations of the Clayton Act, which prohibits mergers that stifle competition, Burton said he does not think the Pilot-Flying J deal will set off any alarms. Authorities are primarily concerned with whether a national merger will hinder competition in local markets, he said.
"This is not the sort of thing that would typically get their attention," he said.
Sharon Curtis Flair, spokesperson for the Tennessee Attorney General's Office, and a U.S. Department of Justice Antitrust Division spokesperson, told the paper that their departments look at any large merger that might have potential to affect consumers, but do not comment on any merger unless the department has taken legal action on that merger.
Pilot Corp. and Marathon Oil Corp. formed a joint venture in 2001 to develop Pilot Travel Centers. In September, Pilot Corp., which is wholly owned by the Haslam family, bought out Marathon's 50% stake in Pilot Travel Centers, then announced it was selling a 47.5% interest to CVC Capital Partners, an international private equity firm.
Pilot Travel Centers is now owned by a partnership of Pilot Corp. and Propeller Corp, which is owned by funds advised by CVC Capital Partners. Once the merger is completed, the combined company would be the largest retail travel center operator in North America and also the largest retailer of diesel fuel.
There are approximately 7,000 U.S. truckstop/travel centers, according to Thompson. The largest players are Pilot Corp. with 305 locations; Flying J with 250; TravelCenters of America LLC (TA), Westlake, Ohio, with 164, along with its Petro division with 69; Speedway SuperAmerica, Springfield, Ohio, with 150, Love's Travel Stops & Country Stores, Oklahoma City, with 140; QuipTrip, Tulsa, Okla., with 17; Sapp Bros., Omaha, Neb., with 16 and then the thousands of other smaller companies, including 140 AmBest affiliates. (Click on the Download Now button below for a larger version of the Pilot-Flying J map, pictured).
The only real differences in the Pilot and Flying J models, he said, have to do with foodPilot having fast-food franchises (Arbys, Dairy Queen, McDonalds, Pizza Hut, Subway, Taco Bell and Wendy's), and Flying J having its own sitdown restaurants (click here for previous CSP Daily News coverage), recently closing seven of them.
Neither has a repair facility focus (Flying J has a few). TA/Petro together have the largest number of service and repair locations in the United States.
Click herefor for previous CSP Daily News coverage of the Flying J-Pilot deal.
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