TravelCenters of America Inc. (TA) has reconfirmed that it has rejected ARKO’s unsolicited bid that followed TA’s merger agreement with BP. The move came after ARKO distributed a letter to TA on March 27, restating its proposal.
TA noted that its Board of Directors previously reviewed and determined that “the conditional, unsolicited and unfinanced proposal from ARKO Corp. to acquire TA is neither superior to the transaction TA previously agreed to with BP Products North America Inc., nor is it likely to lead to a superior proposal.”
In the news release and letter to TA, both distributed on March 27, 2023, ARKO restated the terms of its March 14, 2023 proposal and asked TA’s Board to reconsider its proposal.
On March 14, 2023, ARKO submitted an unsolicited, non-binding indication of interest to acquire TA. Following a comprehensive review with its financial and legal advisors, the TA Board unanimously concluded that ARKO’s proposal did not constitute a superior proposal and could not reasonably be expected to lead to a superior proposal. Among the reasons the Board determined that ARKO’s proposal was neither a superior proposal nor likely to lead to a superior proposal was the high level of execution risk resulting from ARKO’s failure to obtain committed financing and that ARKO’s sub-investment grade credit rating was not attractive to Service Properties Trust (Nasdaq: SVC), the landlord of most of TA’s properties.
As previously announced on Feb. 16, 2023, TA entered into a merger agreement with BP, pursuant to which BP will acquire all of the outstanding shares of TA common stock for $86.00 per share in cash, which represents an 84% premium to the average trading price of the prior 30 trading days before announcement. The BP transaction was unanimously approved by the TA Board of Directors.
The BP transaction is the result of an extensive process during which TA and its advisors engaged with multiple potential buyers who the TA Board believed could close with cash on hand or otherwise had committed financing. In addition, in order to meet SVC’s minimum credit criteria for the new tenant and guarantor of the leases between TA and SVC, only parties that had a minimum investment grade credit rating of BBB/Baa2 were invited into the process. BP is financing the transaction with cash on hand and has an investment grade credit rating of A3/A-. As ARKO concedes, ARKO requires third party capital to close any potential acquisition and its sub-investment credit rating of B+/B2 is several notches below BBB/Baa2.
A condition to consummation of the BP transaction is approval by shareholders who own a majority of TA’s shares outstanding. SVC, which owns 7.8% of TA’s shares outstanding, and The RMR Group (Nasdaq: RMR), which owns 4.1% of TA’s shares outstanding, both have agreed to vote their shares in favor of the transaction. TA has set a record date of March 23, 2023 and has filed its preliminary proxy statement for shareholder approval of the BP transaction. Subject to shareholder and regulatory approval, the parties are targeting closing the acquisition by mid-year 2023.
TA operates 281 locations in 44 states, principally under the TA, Petro Stopping Centers and TA Express brands.