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Warren Buffett’s Berkshire Hathaway averted a courtroom showdown over its purchase of a truck stop operator founded by a Tennessee billionaire, after settling a dispute centred on the value of the business.
Berkshire had struck a deal about six years ago to acquire an interest in Pilot Travel Centers, founded by billionaire James “Big Jim” Haslam II, patriarch of a powerful Tennessee family.
The $11bn deal, which has turned into one of Berkshire’s largest corporate acquisitions over the past five years, raised the prospect of damage to the sprawling conglomerate’s reputation as the Haslam family accused Berkshire of shifting the terms of the deal over time.
The purchase was done in stages, with Berkshire initially buying a 38.6 per cent interest in 2017 for $2.8bn before spending a further $8.2bn last year for another 41.4 per cent, boosting its total stake to 80 per cent. The Haslams have an option to sell its remaining 20 per cent stake to the conglomerate.
But the deal turned acrimonious last year. In October, the Haslam family company Pilot Corp accused Berkshire of changing the truck stop chain’s accounting methodology to make it look less profitable and lower the value of the remaining 20 per cent stake.
Berkshire hit back in November, accusing the founder’s son Jimmy Haslam III, co-owner of the Cleveland Browns football team, of seeking to suborn executives at Pilot into inflating the company’s profits, by secretly promising them payments.
The price for the remaining 20 per cent stake was to be based on 10 times the company’s earnings before interest and taxes, with some adjustments, but how those earnings were calculated was at the centre of the dispute.
“Buffett’s refusal to even disclose Berkshire’s position on the proper method of valuing Pilot’s put right [its right to sell shares] has not only made litigation inevitable, but also made clear that Berkshire and the board defendants will not commit to honour their contractual obligations and fiduciary duties,” Pilot charged in its complaint.
A trial in a Delaware court was expected to start on Monday. However, in separate statements on Sunday both companies said they had reached an agreement “to fully settle the Delaware litigation”, including “all claims and counterclaims”. Details of the settlement were not disclosed.
Buffett’s anointed successor, vice-chair Greg Abel, was charged with overseeing the negotiations and ultimate settlement, according to people briefed on the matter.
Berkshire did not respond to a request for comment.
Pilot, which also operates the Flying J brand, sells fuel, food and merchandise to truckers and provides showers among other services. The Knoxville-based company is the largest business of its kind in America with more than 750 locations in the US and Canada and 30,000 employees.
The acquisition by Berkshire, whose related interests include car insurer Geico and dealership Berkshire Hathaway Automotive, was regarded as a vote of confidence in the US economy and more particularly in the traditional transport sector, despite the rise of electric vehicles.
The surging valuation coincided with a boom in sales at Pilot’s truck stops, as companies raced to overcome supply chain disruptions they faced in the midst of the pandemic.
“The first stage we bought it at what turned out to be a very attractive price,” Buffett told investors last year. “The second stage turned out to be a very good year for the diesel business, which means that the seller got a very good price.
He added: “We would have rather . . . bought the 80 per cent to start with.”