It turns out that Golden Gate Capital still has appetite for buying TravelCenters of America LLC (NYSE:TA) despite the rejection of its earlier offer. Golden had proposed to acquire TravelCenters for $14 a share back in December, but the management of TravelCenters wasn’t interested.
The $14 a share buyout price would have valued TravelCenters of America LLC (NYSE:TA) at $540 million at that time. But today the company’s market cap has shrunk to nearly half of what Golden wanted to pay for it late last year.
No hostile bid
Although Golden is still interested in bringing TravelCenters under its armpit and might make another bid, people with insider knowledge of matters at the firm revealed that a hostile takeover was out of question. With that, it means Golden is hoping that TravelCenters will accept its second buyout proposal without a tag of war. But is unclear whether Golden would offer more than $14 a share it previously proposed for TravelCenters considering how low shares of TravelCenters have sunk in the recent months.
Lower oil prices
TravelCenters of America LLC (NYSE:TA), which operates a portfolio of truck-stops, has been a victim of the fallout in oil prices. The company operates some 255 truck-stops that include convenience stores, restaurants, fuel stations and truck-repair centers. It is also the owner of about 228 convenience stores in the Midwest under the brand name Minit Mart.
The impact of lower oil prices can be seen in TravelCenters’ shrinking financial performance. The company’s fuel revenue fell about 30% in 1Q2016 despite an 8% increase in fuel sale volume. The pullback in fuel revenue led to a 17% decline in total revenue in the quarter compared to a year earlier. TravelCenters also logged EPS loss of $0.26 compared to EPS profit of $0.41 in the comparable quarter last year.
The last four quarters have also seen TravelCenters of America LLC (NYSE:TA)’s financial performance fall short of consensus estimates.
Pressure to break up TravelCenters of America LLC (NYSE:TA)
The revelation that TravelCenters of America LLC (NYSE:TA) had rejected a bid of $14 a share might increase pressure on the company to improve shareholder value. The management of TravelCenters is already under pressure from activist investor RDG Capital Fund Management who is recommending a breakup of the company.