KNOXVILLE, Tenn. — Court records unsealed last week revealed Berkshire Hathaway is being sued by the Haslam family over its accounting practices in acquiring the Pilot Flying J brand.
Berkshire initially invested in Pilot in 2017, taking a 38.6 percent equity stake in the company for $2.758 billion. Over the last six years, Berkshire has accumulated a majority share for an additional $8.2 billion, resulting in an 80 percent ownership stake. The remaining 20 percent stayed under the control of founder James Haslam II and his extended family.
According to reporting by Bloomberg, the deal maintained an option for the Haslam family to sell its remaining shares to Berkshire on Jan. 1, 2024, with additional options to sell the shares yearly thereafter. However, according to the suit, a change in accounting practices this year may have depressed the price of the Haslam shares.
The suit alleges Berkshire employed pushdown accounting rules, in violation of the acquisition agreement which required assets be written up to reflect the value of Pilot's purchase price. Instead, the suit alleges, the new accounting formula artificially depreciates the value of the relevant assets and unfairly cuts the value of both the Haslam shares and Pilot itself.
As a result, the family has asked a Delaware court to reinstate the old accounting method and maintain the initial valuation for the shares, reported Bloomberg.
In a prepared statement to Knox News, Pilot’s Chief Legal Counsel Kristin Seabrook asserted that the suit would not affect the greater operations of the company.
“This legal dispute is limited to a narrow issue between owners and is in no way related to the management or day-to-day operations of Pilot Co.,” she said.
Despite the new twist the lawsuit has added to the benefits Berkshire has seen from the acquisition, the firm has nevertheless moved ahead with major personnel changes in the wake of its takeover. In May, it installed Adam Wright as the company’s new CEO and Joe Lillo as the new chief financial officer. Both men had served long tenures with Berkshire Hathaway in their energy divisions.
The Pilot and Flying J travel center network includes more than 750 locations in 44 states and six Canadian provinces with more than 790 restaurants, 77,000 truck parking spaces, 5,500 deluxe showers, 6,300 diesel lanes and truck maintenance and tire service with Southern Tire Mart.