In The News

Pilot, Flying J to sell 30 locations to Love's prior to merger

A NEWS ANALYSIS

The combined market share of Pilot Travel Centers and Flying J as merged entities apparently is not going to be as large as originally thought.

An analysis of the combined market share resulting from the combination of the Pilot and Flying J locations indicates that the new operation would have 16 percent of the interstate locations and 23 percent of the fuel lanes, according to data provided by The Trucker’s Friend.  (www.truckstops.com )

However, one knowledgeable industry participant believes that the combined market share of the Pilot and Flying J locations would exceed 50 percent of the interstate diesel fuel market because these two operations, along with TravelCenters of America and Petro Stopping Centers, have a disproportionately higher share of the business of the large national trucking companies because of their extensive national networks.

As a result, Pilot, the market leader, and Flying J, the number 3 participant in the industry behind TA/Petro, would have significantly greater purchasing power and would therefore be able to gain even a greater market share because of its enhanced pricing power, not dissimilar to Wal-Mart.

As a result, the Federal Trade Commission has significant concerns about antitrust implications of this combination.

To alleviate these concerns, Pilot and Flying J are planning to divest about 30 locations (10 to 15 which are Pilot locations) to Love’s Travel Stops and Country Stores at a price estimated to be in the range of $100 to $150 million, or $3 to $5 million a location, reliable source said

This transaction makes sense for Love’s because it will allow the company to expand its regional presence from 5.5 percent to 6.9 percent of the interstate fuel lanes, or about 60 percent and 30 percent of the fuel lanes for TA/Petro and Pilot/Flying J, respectively.

While there was speculation that Pilot and Flying J, both headquartered in Red States, would have a difficult time with the Obama administration and its more aggressive antitrust policies, Pilot is not without its political connections.

Bill Haslam, one of owners of Pilot, is now running to be governor of Tennessee while his brother, James, Pilot’s chief executive officer, was the campaign chairman for Senator Bob Corker, the junior Senator from Tennessee.

Needless to say, the clock is ticking on this transaction.

Pilot and Flying J are more than likely incurring significant commitment fees on the financing, most likely in the range of $2 million a month, and may be running up against some drop dead dates imposed by the lenders.

Nevertheless, this transaction is a win-win situation for the shareholders of Pilot and Flying J.

But the success of the deal depends on the approval of the Federal Trade Commission, the successful execution of its operating plan, and the future refinancing of its high level of intermediate term debt.

Jack Humphreville can be contacted to comment on this article at [email protected] . He is also affiliated with Recycler Classifieds
( www.recycler.com ).

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