Convenience store operator Arko is not giving up its quest to acquire TravelCenters of America, despite the fact that TA’s directors have voted unanimously to recommend TA sell to international oil giant BP.
In a one-two punch of a press release and an 8-K filing with the Securities and Exchange Commission, Arko (NASDAQ: ARKO) said it was “surprised and disappointed” that TA (NASDAQ: TA) had “failed to engage at all with Arko” on its March 14 proposal to acquire the truckstop operator, and instead has affirmed that it will accept the bid from BP (NYSE: BP).
In a statement issued Tuesday, TA said the bid by Arko — which at $92 per share on the surface tops the BP bid of $86 per share — was inadequate because of several concerns, including financing and the sub-investment-grade debt rating of Arko.
But in a letter sent Wednesday to the TA board of directors, Arko said it “remain[s] highly confident in our ability to finance the transaction.”
The letter stated that private equity firm Oak Street Real Estate Capital Partners has committed to provide Arko with an additional $1.25 billion of financing to allow Arko to complete the acquisition. The value of the $92-per-share offer from Arko to TA is approximately $1.4 billion.
“We believe this demonstrates our ability to finance this transaction,” Arko said in its letter.
Previous Arko statements and the letters it sent to TA directors, which were also filed with the SEC, were not as specific as the reference to the $1.25 billion from Oak Street, which owns much of the real estate where Arko operates convenience stores.
The other references to Oak Street and its ability to finance a TA acquisition were more general, such as in a letter to the TA board last week.
“In the past eighteen months we have entered into acquisitions constituting approximately $900 million in transaction value, financed in part under our publicly disclosed program agreement with Oak Street Capital,” that letter stated. “Of those acquisitions we have never required any financing condition, and since 2013 we have closed on every acquisition for which we have gone under contract. Because we were excluded from your sale process, time is short, but we have the ability and resources to move fast and complete a transaction.”
In the Wednesday letter, Arko said that beyond the financial resources coming from Oak Street, “Arko has significant additional liquidity through cash, cash equivalents, and availability under its existing credit lines. Arko’s superior proposal does not include any financing contingency to consummate the proposed transaction.”
Arko’s balance sheet listed cash and cash equivalent of almost $300 million at the end of 2022.
In its proxy statement last week, which was the first revelation of an alternate bidder to BP — with the identity not revealed until Friday when Arko publicly declared its intentions — TA said it believed the BP offer was superior for several reasons, including doubts about the ability of the then-unidentified bidder to close the deal.
Additionally, SVC (NASDAQ: SVC), the real estate investment trust that is the landlord for many of the TA properties, said it had concerns with the bidder that turned out to be Arko, citing in particular its sub-investment-grade credit rating.
But Arko is undeterred. “We are available to meet at any time to answer questions of the Board, management or your advisors so that you are in a position to validate the superiority of our proposal and so that ARKO and TravelCenters can enter into a merger agreement as soon as possible,” the Wednesday letter concludes.
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