ARKO Urges TravelCenters of America to Talk Possible Deal

RICHMOND, Va. — ARKO Corp. isn't finished making its case to acquire TravelCenters of America (TA) Inc. The parent company of GPM Investments LLC sent a letter to TA's board of directors on April 17 noting it is "surprised and disappointed" with the board's lack of engagement with ARKO's acquisition proposal and offering several points of clarification.

When TA opted to move forward with its $1.3 billion sale to BP, in which BP will pay $86 per outstanding share of TA, over ARKO's offer of $96 per share the board stated that ARKO's potential financing is conditional and uncommitted, and that its sub-investment grade credit rating is not acceptable to Service Properties Trust (SVC), the landlord of most of TA's properties.

"We initially attempted to provide our more compelling superior proposal at $92 per share in cash privately and have tried several times unsuccessfully to speak with TravelCenters and its financial and legal advisors," ARKO stated in its letter, which was signed by Chairman, President and CEO Arie Kotler and Maury Bricks, general counsel, and filed with the U.S. Securities and Exchange Commission.

"It is surprising that to date neither TravelCenters nor its financial and legal advisors have contacted us directly to ask any clarifying questions when it would be in the best interest of all TravelCenters' shareholders to engage in our proposal at $92 per share in cash compared to BP's proposal of $86 per share in cash," the letter added.

MAKING COUNTER-ARGUMENTS

Due to TA's "ongoing refusal to engage" with ARKO, the company addressed in the letter multiple potential concerns highlighted by TA's board.

To address the concerns of SVC despite disagreeing with the prior position of TA's board, ARKO offered to enter into a binding policy with a leading U.S. insurance provider with an investment grade credit rating that is prepared to fully insure the lease payments pertaining to TA's obligation to SVC over 11-year lease term at ARKO's cost. The letter stated that ARKO has had discussions with an insurance provider that would, with access to information provided to BP, be in a position to expeditiously enter into a binding policy.

"SVC now has the comfort of an investment grade counterparty for the lease term, fully alleviating any potential concerns around ARKO's credit rating," the letter read. "We would also reiterate ARKO's more attractive lease prepayment proposal, with $202 million of upfront lease payments (11 years) in cash compared to $188 million (10 years) offered by BP."

ARKO also stated that it can potentially provide even more value than $92 in cash to TA shareholders, adding that it is not asking the TA board to deem today that its proposal is superior, but that it could lead to a superior proposal in binding documentation.

"We remain perplexed by the board's notion that the financing is uncommitted and conditional," the letter continued. "Again, we have received no clarifying questions or engaged in discussions with TravelCenters or its financial and legal advisors related to this matter."

ARKO anticipates funding such a deal with a mix of balance sheet cash, proceeds from Oak Street and existing lines of credit available to ARKO. It clarified that the $92-per-share offer would be payable in cash with ARKO also funding the termination fee of $51.9 million payable to BP, as specified in the current merger agreement; the approximately $44 million termination fee payable to The RMR Group; and approximately $90 million to SVC for brand purchase.

"We hope this further clarifies our financing for the transaction. It is not reasonable for the board to expect ARKO and its financing sources to enter binding terms at this stage without any access to due diligence," ARKO stated. "We can confirm there will be no financing contingencies in the definitive documentation. ARKO believes it is riskless to TravelCenters' stockholders for TravelCenters' board to engage with ARKO, and that doing so could reasonably be expected to lead to a superior proposal including fully committed financing not subject to any conditionality."

ARKO emphasized that it has reviewed TA's merger agreement with BP and is prepared to accept substantially the same, and potentially even more favorable terms in the execution of a superior proposal.

"There can be no more excuses from the board to immediately engage with ARKO and provide us access to the diligence information provided to BP," the letter concluded. "We are available to meet at any time to answer questions of the board, management, or your advisors so that you are in a position to validate the superiority of our proposal and so that ARKO and TravelCenters can enter into a merger agreement as soon as possible."

Richmond-based ARKO Corp. owns 100 percent of GPM Investments and is one of the largest operators of convenience stores and wholesalers of fuel in the United States. It operates in four reportable segments: retail, which includes convenience stores selling merchandise and fuel products to retail customers; wholesale, which supplies fuel to independent dealers and consignment agents; fleet fueling, which includes the operation of proprietary and third-party cardlock locations, and issuance of proprietary fuel cards that provide customers access to a nationwide network of fueling sites; and GPM Petroleum, which sells and supplies fuel to our retail and wholesale sites and charges a fixed fee, primarily to its fleet fueling sites.

Westlake-based TravelCenters of America Inc. is the nation's largest publicly traded full-service travel center network. Founded in 1972, its more than 18,000 team members serve guests in 281 locations in 44 states, principally under the TA, Petro Stopping Centers and TA Express brands. Offerings include diesel and gasoline fuel, truck maintenance and repair, full-service and quick-service restaurants, travel stores, car and truck parking, and other services dedicated to providing great experiences for its guests.

TA is committed to sustainability, with its specialized business unit, eTA, focused on sustainable energy options for professional drivers and motorists.

The operator has more than 600 full-service and quick-service restaurants and nine proprietary brands.