Flying J, Pilot Merger Plan Faces Antitrust Review

This story appears in the Aug. 10 print edition of Transport Topics.

After clearing its first legal hurdle in U.S. bankruptcy court, the proposed merger between truck stop operators Flying J Inc. and Pilot Travel Centers is about to undergo a federal antitrust review.

According to documents filed with the U.S. Bankruptcy Court for the District of Delaware, Pilot and Flying J were bound to seek approval of the merger from the Federal Trade Commission by last week.

In a July 30 hearing, Bankruptcy Judge Mary Walrath cleared the way for Flying J and Pilot to combine their truck-stop networks under terms set in a July 13 letter of intent, which the companies filed with the Delaware court.

Neither Pilot nor Flying J would comment on the status

of the antitrust review to Transport Topics. The FTC also de-clined to comment.

The deal cannot go forward without FTC approval. The combination, termed a “merger” by the companies, will make Pilot, already the country’s largest truck-stop chain with 300 locations, even larger.

Flying J filed for bankruptcy in December after the oil bubble burst last summer. Pilot has agreed to pay $300 million to $500 million in cash and stock to buy Flying J’s network of about 250 U.S. truck stops. Pilot also will provide $100 million in bankruptcy financing, which Flying J said it urgently needs to satisfy its near-term liquidity needs.

The top executive at TravelCenters of America LLC, Westlake, Ohio, said last week his company was evaluating the threat posed by a possible combination of Pilot and Flying J, but he did not think his company would pursue legal action to stop it.

With respect to fuel markets, “the combined [Pilot and Flying J] has better selling power, better buying power. Those are threats,” Tom O’Brien, TravelCenters’ CEO, said Aug. 5 during the company’s second-quarter earnings call.

Pilot and Flying J are, respectively, the largest and second-largest sellers of over-the-road diesel in the country. TravelCenters of America is No. 3, O’Brien said.

However, O’Brien also said that if Pilot and Flying J merge, “maybe they won’t feel the need, when they’ve got such a dominant position, to be as aggressive [on fuel pricing] as they have in the past.”

He added that he did not think TravelCenters would oppose the combination of its two largest competitors on antitrust grounds.

“I don’t think it’s the end of the world,” O’Brien said.

Meanwhile, as a condition of approving the merger, the Delaware bankruptcy court ordered Flying J to drop a three-year-old lawsuit against Pilot and fuel card provider Comdata Corp.

In the lawsuit, filed in the U.S. District Court for Utah, Flying J accused Pilot and Comdata, the largest fuel card provider, of conspiring to push Flying J’s own fuel card, TCH, out of the market by charging merchants higher processing fees for diesel purchased with TCH cards.

Judge Walrath, in her written order, directed Flying J “to dismiss against the Pilot Travel parties with prejudice the antitrust litigation.”

Comdata, which does not currently do business at Flying J, said Aug. 5 that the lawsuit had not yet been dismissed. The company declined additional comment because the litigation is pending.

Flying J’s 2006 lawsuit is unrelated to similar antitrust allegations brought against Comdata, Pilot and other truck-stop chains in 2007 and 2009 by a group of independent truck-stop owners (7-27, p. 6).

Pilot is buying only “Flying J’s core travel plaza business,” the companies have said. Flying J’s Longhorn Pipeline, Big West Oil, Flying J Oil & Gas, Haycock Petroleum and Transportation Alliance Bank subsidiaries are not part of the deal.

Neither Flying J nor Pilot would comment specifically on the branding of the combined network. The post-merger role of key Flying J management personnel, including Chairwoman Crystal Call Maggelet, was unclear as TT went to press last week.

Likewise, the two truck-stop chains have not announced any post-merger cost-cutting or consolidation measures, nor have they disclosed any planned service changes.

“There are a number of practical details that are yet to be determined at this stage in the process,” Flying J said through a spokesman. “Potential management changes and the future administration of . . . services would both fall into that category.”

Separately, Pegasus TransTech, which provides document processing services at truck stops, said only that it is “committed to working with [Pilot] after the merger.”

Pegasus’ services are available at Pilot’s truck stops, but the company currently has no presence with Flying J.

ACS TripPak, another document processing company, declined to comment on the ramifications of the merger. TripPak already has a presence at all three of the major U.S. truck-stop chains.

Roadside Medical, which runs clinics for truck drivers at some Pilot truck stops, said that its arrangement with Pilot remains unchanged and that there are no plans to add clinics at Flying J locations.