TravelCenters of America has shut the door on any further talks with Arko Corp. about its acquisition bid for the truck stop operator and will proceed with its plan to be bought by BP.
In a proxy statement filed with the Securities and Exchange Commission on Monday, TA said it was reiterating the conclusion of its board of directors that the Arko bid “failed to constitute a Superior Proposal and could not reasonably be expected to lead to a Superior Proposal.”
And TA (NASDAQ: TA) has no plans to speak with Arko (NASDAQ: ARKO), according to the proxy. “TravelCenters is prohibited from engaging with Arko pursuant to the terms of the merger agreement,” the proxy said.
The BP (NYSE: BP) bid to acquire TA is $86 per share. The Arko bid is $92 per share.
But TA has questioned the ability of Arko to close the deal without additional financing, a view that Arko sought to rebut last week by citing the backing of its real estate partner, Oak Hill Capital Partners.
A sticking point that was reiterated by TA on Monday is the debt rating of Arko, which is below investment grade. That debt rating is a problem for TA’s landlord, Service Properties Trust (NASDAQ: SVC), according to earlier TA statements and a follow-up statement Monday.
Referring to a letter and news release published last week by Arko about its financing, TA said neither “addressed the deficiencies in ARKO’s proposal previously identified by TA’s Board, including that ARKO’s potential financing is conditional and uncommitted and that ARKO’s sub-investment grade credit rating is not acceptable to TA’s landlord who owns the majority of TA’s properties and whose approval of a change of control of TA is required pursuant to the terms of those leases for the transaction.”
Given those concerns, TA said it does not believe the Arko bid could rise to the level of a superior bid, despite the premium in the per-share price. And further discussions won’t happen, according to TA. “Accordingly, pursuant to the terms of the merger agreement with BP, TA, including its advisors, is contractually prohibited from engaging with ARKO.”
The merger agreement between TA and BP has a $51.9 million termination fee if TA backs out of the deal.
According to the proxy, CEO Jonathan Pertchik will receive total “golden parachute” compensation of just over $21 million. Pertchik joined TA in late 2019. TA’s stock at the start of 2020 was about $16.85 and has risen about 510% since then to get to the $86 acquisition price by BP.
When the BP bid was announced Feb. 15, its $86 price was at a roughly 74% premium to the closing price one day earlier.
If Arko had acquired TA, it would have allowed the convenience store operator to more than double its size. Arko recently had a market capitalization of about $1 billion. The size of the TA offer is $1.4 billion. BP’s offer is valued at about $1.2 billion.
Outside of recapping the history of Arko’s bid, TA made no other reference to the Arko offer in its 172-page proxy statement.
The proxy did spell out that there will be a special shareholders meeting to approve the BP merger at 9:30 a.m. May 10.
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