On January 17th, Beijing time, Berkshire Hathaway, a subsidiary of Warren Buffett, announced that it had acquired the remaining 20% equity of Pilot Travel Centers, the largest travel service center operator in the United States, from the Haslam family. The latter became a wholly-owned subsidiary of Berkshire. The financial terms of this transaction were not disclosed.
Berkshire acquires Pilot
Prior to this acquisition, Berkshire had already invested approximately $11 billion to own 80% of Pilot's shares. However, in October 2023, the Haslam family, who sold their equity, filed allegations that Berkshire's management attempted to lower the valuation of the remaining 20% of the shares by modifying accounting rules. This dispute was later resolved, and both sides avoided the originally planned two day trial scheduled for January 8th this year.
As early as October 2017, Berkshire held a 38.6% stake in this company. Five years later, according to the Berkshire annual report released on February 25, 2023, Berkshire acquired 41.4% equity of Pilot for $8.2 billion on January 31, 2023 (estimated at a valuation of $19.8 billion), giving Berkshire control of Pilot.
The completion of the latest transaction this month means that Pilot Tourism Center has officially been incorporated into Berkshire's wholly-owned subsidiary, further expanding its business landscape in the tourism services sector. Berkshire is known for its diversified investment layout and precise market insights, which may further consolidate Buffett's influence in related industries.
What kind of company is Pilot?
At the 2023 Investor Conference, Berkshire CEO Warren Buffett responded that Berkshire's purchase of Pilot was a three-stage transaction. The first stage has a good price, and the second stage is very favorable to the seller due to their previous excellent performance. Since the purchase of Pilot's shares in 2017, this portion of the shares has undergone equity accounting treatment. In early 2023, Berkshire purchased additional equity in Pilot, which increased its ownership to 80% and resulted in Berkshire fully integrating Pilot's earnings, assets, and liabilities in its financial statements.
In Buffett's view, the location of the Pilot is very good.
According to the description in Berkshire's annual report, Pilot is the largest travel service center operator in North America (with its main brands being Pilot or Flying J), with over 650 travel centers in 44 states in the United States and 6 provinces in Canada. Pilot also has over 150 retail points in the United States and Canada, and its business in Canada mainly involves diesel sales through various agreements with third-party travel service centers. Pilot sold over 13 billion gallons of fuel (mainly diesel and gasoline) in 2022. Pilot currently has approximately 25500 employees.
Pilot's travel service centers are typically located near interstate highways, providing consumers and professional truck drivers with petroleum products, retail goods, fast food, as well as various services and amenities. Although Pilot's main business is operating fuel and in store travel service centers, it also signs distribution agreements with existing (third-party) travel centers where Pilot purchases and sells diesel for a fee. In addition, Pilot also operates a large wholesale fuel and fuel marketing platform in the United States, and operates water transportation and disposal businesses in the oil field sector.
Berkshire has been taking frequent actions recently
In addition to the acquisition of Pilot, Berkshire's recent increase in holdings in Western oil is also very evident.
On January 11th, Beijing time, the latest disclosure by the US Securities and Exchange Commission (SEC) showed that Berkshire's stake in Western Oil had increased to 34%. In December 2023, Berkshire continued to increase its holdings in Western Oil and bought over 15 million shares in a series of transactions, with a total cost of approximately $900 million.
In December 2023, Western Oil announced the acquisition of US shale oil and gas company CrownRock for a total value of $12 billion. CrownRock is the third largest non-public oil producer in the Permian Basin of the United States, and its business complements that of Anadarko Oil Company, which was previously acquired by Western Oil. The Permian Basin is also one of the most profitable oil and gas fields in the United States.
At the Berkshire shareholders' meeting in 2023, Buffett said, "We really like the resources, industry position, and technological level of Western oil companies in the Permian Basin. They have many high-quality oil wells and have done many beneficial things, which is a completely different oil industry."
At present, the market generally speculates that Berkshire's increase in holdings in Western Oil will ultimately achieve its goal of controlling or even acquiring as a whole. Some institutional investors predict that the relationship between Berkshire and Western Oil may eventually evolve into a "slow paced acquisition.".
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