Berkshire Hathaway Purchase of Pilot Travel Centers

In a recent filing with the Securities and Exchange Commission, Berkshire Hathaway disclosed that it paid $2.6 billion to acquire the remaining 20% stake in Pilot Travel Centers that it did not previously own.

Resolving Legal Disputes

The acquisition followed a resolution of legal battles between Berkshire and Pilot Corp. regarding the calculation of the purchase price for Pilot's remaining shares in the truck stop chain.

Back in 2017, Berkshire Hathaway initially bought a 38.6% interest in Pilot for almost $3 billion. Last year, it further increased its ownership by acquiring an additional 41.4% of the company for $8.2 billion. The transaction was based on a formula that involved multiplying the chain's earnings before interest and taxes by a factor of 10, with adjustments made for cash and debt.

Lawsuits and Settlement

However, disputes arose when Pilot Corp. owner Jimmy Haslam alleged that Berkshire altered its accounting methods after gaining control of the chain, resulting in a devaluation of Pilot's remaining shares. In response, Berkshire filed a countersuit, accusing Haslam of incentivizing employees to artificially inflate short-term profits to enhance the family's stake's value at the expense of long-term sustainability.

Fortunately, both parties reached a settlement on the eve of litigation in a Delaware court. The terms of the final sale, including the price of Pilot Corp.'s remaining shares, remain undisclosed to the public.

Pilot Travel Centers Operation Overview

Pilot Travel Centers operates over 650 travel centers and 75 fuel-only locations throughout 44 states and five Canadian provinces. The company also manages wholesale fuel and fuel marketing businesses within the United States.

Financial Insights

In a recent filing, Berkshire revealed that Pilot's revenue amounted to $56.8 billion in 2023, a significant decrease of $16 billion, or 22%, compared to the previous year. This decline was attributed to various factors such as lower fuel prices, reduced fuel sales volumes, and a drop in in-store sales.

Pilot's fuel sales saw a notable decline as well, totaling 16.2 billion gallons last year, down by nearly 12% from 2022. The primary impact was observed in Pilot's wholesale fuel and fuel marketing segments.

Moreover, Pilot's operating expenses surged to $3.067 billion, an increase of almost 19% from the previous year, which stood at $2.583 billion.

Warren Buffett's Silence

Interestingly, Berkshire CEO Warren Buffett chose not to address the Pilot acquisition or its operational details in his annual letter to shareholders, which was presented on Saturday.