Buffett, new moves!

10 months ago 187

On January 17th Beijing time, Warren Buffett's Berkshire Hathaway announced that it has acquired the remaining 20% stake in Pilot Travel Centers, the largest travel services center operator in the United States, from the Haslam family. As a result, Pilot has become a wholly-owned subsidiary of Berkshire Hathaway.The financial terms of this transaction were not disclosed.Berkshire Hathaway's acquisition of PilotPrior to this acquisition, Berkshire Hathaway already owned an 80% stake in Pilot, with an investment of approximately $11 billion. However, in October 2023, the Haslam family, the sellers of the equity, accused Berkshire Hathaway's management of trying to lower the valuation of the remaining 20% stake by modifying accounting rules. This dispute was later resolved, and both parties avoided the originally planned two-day trial that was scheduled to take place on January 8th this year.In October 2017, Berkshire Hathaway already held a 38.6% stake in the company. Five years later, the Berkshire Hathaway annual report released on February 25th, 2023 showed that Berkshire Hathaway acquired an additional 41.4% stake in Pilot for $8.2 billion (resulting in an enterprise valuation of $19.8 billion) on January 31st, 2023, thereby gaining control of Pilot.With the completion of the latest transaction this month, Pilot Travel Centers is officially under the umbrella of Berkshire Hathaway, becoming its wholly-owned subsidiary and further expanding its business map in the travel services sector. Berkshire Hathaway is known for its diversified investment layout and precise market insights, and this move may further consolidate Buffett's influence in related industries.What kind of company is Pilot?At the 2023 investor meeting, Berkshire Hathaway CEO Warren Buffett responded that buying Pilot was a transaction divided into three stages. The price was very good in the first stage, and the sellers benefited greatly from their excellent performance in the second stage. Since the purchase of Pilot shares in 2017, this portion of the shares has undergone "equity" accounting treatment. At the beginning of 2023, Berkshire Hathaway purchased additional equity in Pilot, raising its ownership to 80%, and resulting in the full integration of Pilot's income, assets, and liabilities in Berkshire Hathaway's financial statements.In Buffett's view, Pilot has excellent locations.According to the description in Berkshire Hathaway's annual report, Pilot is the largest travel services center operator in North America (under the main brands Pilot or Flying J), with over 650 travel centers in 44 states in the United States and 6 provinces in Canada. Pilot also owns more than 150 retail points in the United States and Canada, and its business in Canada mainly involves diesel sales through agreements with third-party travel services centers. Pilot sold over 13 billion gallons of fuel (mainly diesel and gasoline) in 2022. Pilot currently has approximately 25,500 employees.Pilot's travel service centers are usually located near interstate highways, providing petroleum products, retail goods, fast food, and various services and facilities for consumers and professional truck drivers. While Pilot's main business is operating fuel and in-store travel service centers, it also enters into distribution agreements with existing (third-party) travel centers. Pilot purchases and sells diesel at these locations for compensation. In addition, Pilot operates large-scale wholesale fuel and fuel marketing platforms in the United States and is involved in water transportation and disposal businesses in the oilfield sector.Berkshire Hathaway's recent frequent actionsIn addition to the acquisition of Pilot, Berkshire Hathaway's increasing holdings in Phillips 66 have also been evident recently.On January 11th, Beijing time, the latest filings disclosed by the United States Securities and Exchange Commission (SEC) showed that Berkshire Hathaway's ownership stake in Phillips 66 has increased to 34%. In December 2023, Berkshire Hathaway continued to increase its holdings in Phillips 66, buying over 15 million shares at a total cost of approximately $900 million in a series of transactions.In December 2023, Phillips 66 announced the acquisition of CrownRock, a shale oil and gas company in the United States, for a total value of $12 billion. CrownRock is the third-largest privately held oil producer in the Permian Basin, which complements the business of Phillips 66's previous acquisition of Andeavor. The Permian Basin is also one of the most profitable oil and gas fields in the United States.At Berkshire Hathaway's 2023 shareholder meeting, Buffett said, "We really like Phillips 66's resources, industry position, and technical capabilities in the Permian Basin. They have a lot of great wells and have done a lot of good things. It's a completely different oil business."Currently, the market widely speculates that Berkshire Hathaway's increased holdings in Phillips 66 will eventually reach the goal of controlling or even acquiring the company as a whole. Some institutional investors predict that the relationship between Berkshire Hathaway and Phillips 66 may eventually evolve into a "slow-paced acquisition."

Buffett, new moves!

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