Oil Giant BP Acquires TravelCenters of America
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TravelCenters of America is being acquired by BP Products North America in a $1.3 billion deal announced Feb. 16.
The transaction, valued at $86 per share, expands the reach of BP’s fueling station and off-highway convenience store network to include TravelCenters’ 281 truck stop and travel center locations across 44 states, which operate principally under the TA, Petro Stopping Centers and TA Express brands.
The deal remains subject to shareholder approvals.
BP Products North America, headquartered in Houston, is a division of London-based British Petroleum.
— bp America (@bp_America) February 16, 2023
BP said that the convenience sector is one of five strategic areas where it aims to significantly grow investment through this decade.
“This is BP’s strategy in action,” BP CEO Bernard Looney said. “We are doing exactly what we said we would, leaning into our transition growth engines. This deal will grow our convenience and mobility footprint across the U.S., and grow earnings with attractive returns.”
He added, “Over time, it will allow us to advance four of our five strategic transition growth engines. By enabling growth in EV charging, biofuels and RNG, and later hydrogen, we can help our customers decarbonize their fleets. It’s a compelling combination.”
Last month Westlake, Ohio-based TA announced it had teamed with Electrify America to install EV charging stations.
Jonathan Pertchik, CEO of TA, said, “Today’s announcement that BP is acquiring TA for $86 per share is a result of the successful implementation of our turnaround and strategic plans. We have improved our core travel center business, expanded our network, launched eTA to prepare for the future of alternative fuels, and improved our operating and financial results, none of which we could have accomplished without the hard work and dedication of our employees at every level.”
TA also has been able to make notable progress with its network growth strategy leading up to the acquisition announcement. The company announced last month that it signed 30 franchise agreements. It already opened three franchise sites last year and plans to open 20 more locations this year.
Also, the company has pursued expanding. It acquired seven existing travel centers that began operating as TA or Petro locations in 2022. Six had truck maintenance facilities.
“Subject to approvals, we look forward to welcoming the TA team to BP,” said Dave Lawler, chairman and president of BP America. “TA’s amazing nationwide network of on-highway locations combined with BP’s more than 8,000 off-highway locations have the potential to offer travelers and professional drivers a seamless experience for decades to come.”
BP expects the acquisition to deliver over 15% returns and bolster earnings in 2024.
TravelCenters of America was priced at around a six-times multiple based on its earnings before interest, taxes, depreciation and amortization (EBITDA) over past 12 months. The sale price also represents an 84% premium to the average trading price of the 30 days ended Feb. 15.
TA’s board of directors unanimously approved the deal. TA noted that the announcement is the culmination of a comprehensive process by its board to implement the turnaround plan. Those efforts resulted in several quarters of improved operating performance.
Its most recent results were reported in November. TravelCenters of America said then that third-quarter net income and revenue rose as it delivered slightly more diesel and less gasoline, and achieved a 24.9% increase in fuel gross margin.
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For the period ended Sept. 30, net income was $36.9 million, or $2.49 per share, compared with $22.2 million, $1.52, a year earlier. Revenue rose to $2.8 billion compared with $1.9 billion in the 2021 period.
Of the company’s total revenue, fuel sales accounted for $2.2 billion compared with $1.4 billion a year earlier. It sold 518,778 gallons of diesel, 1% more compared with 513,827 year-over-year. Gasoline sold fell 11.3% to 63,861 gallons from 72,021.
Total fuel volume was down 0.5%, but fuel gross margin per gallon rose 25.4% to 22.7 cents compared with 18.1 cents a year earlier.
TA and BP have pursued green energy advancements.
BP aims to use around half of its transition growth-engine investment for convenience, bioenergy and EV charging.
TA is teaming with Electrify America to install more than 1,000 charging stalls for electric vehicles at more than 200 locations.
The stations will be at 50-mile intervals along major U.S. highways, according to a joint announcement by TA and Electrify America, a Virginia-based subsidiary of Volkswagen Group of America.
The direct current fast chargers will serve “almost all” brands of electric vehicles, according to the announcement.
Scotiabank noted in a report that it was slightly positive about the announcement. The financial services company highlighted the growth opportunities such a deal presented. It expects the transaction to close midyear.
"The addition of a large network of around 280 travel centers in the United States should also further strengthen BP's overall portfolio and is in line with management's stated strategy to expand their convenience offering, Scotiabank analyst Paul Cheng wrote in the report. The $1.3B cash acquisition is included in the previously communicated $16B-$18B budget, in line with management's previous guidance."
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