M&A Experts React to BP's Acquisition of TravelCenters of America

HOUSTON — With the first major acquisition of 2023 officially on the books, the convenience store and travel center industry is looking ahead to the impact of BP's $1.3 billion purchase of TravelCenters of America (TA).

Experts in mergers and acquisitions agree that the pending deal is good for both BP and the development of alternate forms of energy.

"I was surprised that nobody else thought of it before based on the fact all of the major oil companies are looking for ways to sell more gallons of fuel," Terry Monroe, president and founder of American Business Brokers & Advisors, told Convenience Store News. "TA has locations that are branded multiple brands that can be converted to BP."

According to John Sartory, managing director of Petroleum Capital and Real Estate LLC (PetroCapRE), the TA network's heavy reliance on diesel fuel volume fits nicely with BP's large trading business. "In addition, the acquisition allows the company to further augment its ratable supply operation and further maximize the efficiency and profitability of its proprietary refinery operation in the U.S.," he noted.

Ken Shriber, managing director and CEO of Petroleum Equity Group, called the acquisition "a smart move" and noted that not only do travel centers command large customer counts and therefore huge sales numbers, but also "there are many service offerings provided, including prepared foods and beverages, QSRs [quick-service restaurants], etc., at high margin which are a backstop for the future should motor fuel sales start declining."

A Shifting Competitive Landscape 

The BP-TA deal marks a competitive milestone as travel center chains launch initiatives to attract highway travelers and professional drivers. In recent months, such initiatives have included Pilot Co.'s New Horizons initiative and Love's investments in organic growth and site enhancements for 2023.

"The goal here is to control infrastructure along interstate highways, some of which have not kept pace competitively as evidenced by the New York State Thruway locations and the subsequent decision by Applegreen to invest $450 million to upgrade those facilities," explained Shriber. 

BP's investments in electric vehicle (EV) charging and the company's steps toward becoming an integrated energy company increase the notability of this acquisition.

"Since BP has been a leader in new technologies, I think they should be the one to watch going forward as to how they decide to serve the customers in the future," Monroe said. "Remember, people and vehicles will always be traveling and stopping and needing to fill up with food or fuel, and the 300 locations TA has is an excellent model to work with."

He predicts there won't be a ripple effect as the result of this deal because "no other brand has openly made the commitment to reduce their carbon footprint like BP has."

Monroe called the acquisition of TA a natural fit for BP based on its intention to integrate new technologies and EV, hydrogen and other alternate forms of energy to reduce its dependency on fossil fuels. BP will benefit from the travel center chain having a large number of locations throughout the United States in high-traffic areas.

"[This will allow] BP to experiment with these new technologies without implementing these ideas to the BP system. Since they bought the stock of TA, they essentially bought a separate company without diluting the BP brand," Monroe said. "Plus, they can work through the TA system and where the TA locations are selling a different brand of fuel, change the brand over to BP, thereby increasing the profits of BP through the sale of gasoline and diesel.

"Overall, it was a great decision for BP to acquire TA and they did it in such a way that not only did they get a network of locations, but also the management and infrastructure to continue to run the business," Monroe continued. "Smart move on BP's part."

Future Plans 

Still, BP and TA may have to contend with some regulatory challenges before such experimentation can begin.

"Since BP currently operates a fairly small retail network in the U.S., under previous FTC [Federal Trade Commission] administrators, one would assume this acquisition would be approved and without the need for the buyer to sell many 'problem' sites to a third party. However, under the current FTC chair Lina Kahn, this acquisition may receive a large amount of scrutiny," warned Sartory, noting the higher level of aggressiveness Kahn and her fellow commissioners have demonstrated in reviewing acquisitions in the convenience and gas industry. "[They] definitely seem to have a bias or view that allowing any large corporation, such as BP, to grow is bad for the U.S. economy and its consumers."

Once the deal closes, it may have a clear effect on how investors view the travel center channel. PetroCapRE Managing Director John Flippen Jr. noted that BP's acquisition of TA and the $11 billion investment by Berkshire Hathaway to purchase 80 percent of Pilot Flying J in January affirm a belief in the channel's profitability as well as a willingness to invest for the long term. "I am sure these investments will not go unnoticed by other financial institutions," he said.

Flippen also believes that more of the major players will feel pressure to follow suit.

"Does BP's expected 15 percent internal IRR [rate of return] expectations mean that they expect less IRR from their upstream operations/investments or another sign to diversify its income stream? Restrained supplies and higher fuel margins on diesel fuel is most likely another motivator for this opportunity," Flippen said.

BP's U.S. retail presence currently spans 7,300 sites in 35 states, including the BP, ARCO, ampm, Amoco and Thorntons brands. BP has different retail models across the nation, ranging from company-owned retail stores to strategic partnerships, brand licensing, wholesale, business-to-business, dealer-owned and franchise-owned.