WESTLAKE, Ohio -- More liquid funds means more opportunities for growth, according to officials at TravelCenters of America, who were spreading word yesterday of the company's purchase by a new holding company. We have growth plans that we'll announce in due time, Tom Liutkus, director of advertising and public relations for TA, told CSP Daily News. This was a means for us to fuel that growth plan.
As reported in a CSP Daily News Flash yesterday, Westlake, Ohio-based TA announced that it has entered into an agreement with Hospitality Properties [image-nocss] Trust, under which HPT will purchase TA for approximately $1.9 billion. TA expects business to continue as usual at its 162 locations in 40 states and Canada during the transition period.
Our operations aren't going to be impacted, said Liutkus. They're a real-estate holding company so they don't have expertise in running our business. So they're looking at our business as a means to generate a return on investment by primarily trusting our track record and our business plan is what they're looking for.
HPT is a real estate investment trust that currently owns 310 hotels located throughout the United States, Puerto Rico and Ontario, Canada. HPT is headquartered in Newton, Massachusetts.
TA was acquired by Oak Hill Capital Partners LP, a private-equity investment group and other investors, including TA management and Freightliner in 2000. Previously, the company was owned by a group of institutional investors led by The Clipper Group as well as TA management and Freightliner.
TA expects this transaction to close in early 2007. HPT has arranged interim financing for the transaction from Merrill Lynch & Co. and currently anticipates obtaining long-term financing for this transaction by the issuance of both debt and equity securities.
In May, TA reaffirmed its commitment to continued growth and enhancement of its products and services for professional drivers and motorists by seeking a new major investor to help finance its growth strategies. Those strategies include additional locations and an increase in the number of shop bays.
Liutkus said the company was shopped around by a major brokerage firm. There was a formal process done with other parties invited to participate, he said. He did not know what other companies were involved.
Tim Doane, president and CEO of TA, said, We are very pleased to announce this latest step in the evolution of our company. We anticipate a bright future for TravelCenters of America and are excited about the opportunities these changes will bring to us and our customers. Over the last decade, TA's steady growth has continually rewarded the financial support and confidence of our major investors. We are pleased to announce the plan for this new structure, as we believe it will provide TA with the opportunity and resources to provide enhanced services at expanded locations to all our customers.
"As was the case with previous ownership transitions, we expect business as usual at all TA TravelCenters locations, he added. As we expand and enhance our services, we will continue to offer fleets, owner-operators and motorists the highest-quality travel center services available."
John Murray, president of HPT, said, "We are pleased to have this opportunity to undertake the transactions announced today. We believe TA is the premier full-service network in the country and we look forward to the continuance of its track record of providing value to its stakeholders."
TravelCenters of America is the largest network of full-service travel centers in North America. The company has more than 11,500 employees at 162 locations in 40 states and Canada. The TA network includes 161 locations in 40 states and one site in Ontario, Canada. Included in the 162 TA locations are 13 sites which are owned and operated by TA franchisees.
The typical TA site includes:
Over 20 acres of land with parking for approximately 170 tractor-trailers and 100 cars An approximately 150-seat, full-service restaurant and one to three quick-service restaurants operated under various well recognized brands A truck-repair facility and parts store Multiple diesel and gasoline fueling points A convenience store, game room, lounge and other amenities for truckers and motorists At 20 sites, a hotel operated under a recognized brandThe operating assets of TA, including the franchise agreements, will be spun out to HPT shareholders in an in-kind distribution to create a separately traded, public company with shares listed on a national stock exchange. TA's real estate will be retained by HPT and leased to the new TA company.
HPT currently expects that this transaction will be immediately accretive to HPT's Funds From Operations, or FFO, by between $0.10 and $0.15 per share per year and that HPT shareholders may receive additional significant value from the spin out share distribution of TA.
Murray said the travel-center business is very fragmented and the spin off of [a] new TA will create a new partner with whom HPT may work for future growth.
"The HPT lease will have the same security features which characterize HPT's existing hotel leases and management contracts: one long-term lease for all the properties, a strong parent company guarantee, all or none renewal options, etc., he said. Moreover, based upon historical experience in TA's business, we believe the percentage rents which HPT receives from the new TA may not be subject to the financial cyclicality which has historically affected hotels."
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