Arko tries to keep $1.4B TravelCenters of America bid alive

Updated 5:30 p.m. March 28

Henrico County-based Fortune 500 convenience store holding company Arko Corp. is rivaling British oil and gas giant BP in a $1.4 billion bid to acquire Westlake, Ohio-based TravelCenters of America Inc., a publicly traded convenience store chain with 281 retail stores and roadside restaurants in 44 states.

On Monday, Arko sent a letter to the TravelCenters of America’ board asking that it reconsider its acquisition proposal, which Arko called “obviously superior” to the agreement the North American subsidiary of BP reached in February to acquire TravelCenters of America for $1.3 billion, or $86 cash per share. The transaction was unanimously approved by TravelCenters’ board, the company said in a Feb. 16 news release.

Arko, the holding company for convenience store chain GPM Investments LLC, followed up on March 14 with its own unsolicited offer of $92 per share, a deal that was to be funded by a combination of cash, external financing and credit, the company said Monday, identifying itself in U.S. Securities and Exchange Commission filings discussing the deal as “Party G.” On March 22, Arko’s offer was unanimously rejected by TravelCenters’ board on the basis that it “does not constitute a Superior Proposal and could not reasonably be expected to lead to a Superior Proposal,” according to SEC filings. TravelCenters cited findings of its independent directors in executive session, including that “Party G would require significant third-party financing and there was no firm commitment from a potential financing source” amid current economic uncertainty.

Arko on Monday pushed back against those assertions in a letter signed by Chair and CEO Arie Kotler and General Counsel Maury Bricks to TravelCenters’ board, urging it to “engage with, rather than exclude” the company in the sale process. Arko’s offer represents $100 million in additional value to shareholders, and the company cited its record of 23 transactions in the last decade, including acquisitions valued at about $900 million in the last 18 months that have been financed through private equity firm Oak Street Capital.

“We are highly confident in our ability to finance the transaction, and our proposal includes no financing-related conditions. We have obtained assurances from Oak Street Capital to finance a portion of the necessary funds,” Kotler and Bricks wrote. “When TravelCenters engages with Arko, we and Oak Street Capital would be happy to discuss the financing with you.”

Neither Arko nor TravelCenters responded to requests for comment from Virginia Business on Monday. However, on Tuesday, TravelCenters reiterated its stance in a news release, stating that Arko’s offer was neither superior to the agreement it made with BP, nor likely to become superior, and cited what it referred to as “a sub-investment grade credit rating” that was not attractive to Service Properties Trust, a landlord of TravelCenters’ properties, which has a 7.8% majority stake in the company.

TravelCenters of America has 18,000 employees and reported $10.8 billion in total 2022 revenue. Last year, Arko made the Fortune 500 list for the first time and reported $301 million in adjusted earnings, before interest, taxes, depreciation and amortization (EBITDA).