TravelCenters of America LLC announced it has entered a definitive agreement for the sale of TA’s Minit Mart convenience store business for approximately $330.8 million to EG Group, subject to adjustments of final net working capital and certain prorations at closing. The portfolio TA has agreed to sell includes 225 standalone convenience stores and certain other related assets. The sale will enable TA to exit the standalone convenience store business and focus on its core travel center business. TA currently expects to use the net proceeds from the sale to reduce leverage and/or invest in travel center growth initiatives. TA expects the sale to be completed in the fourth quarter of 2018.
Andy Rebholz, TravelCenters’ Chief Executive Officer, made the following statement about today’s announcement:
“When the sale of this business is completed, TA will exit the standalone convenience store business; allowing us to increase our focus on our core travel center operation, which we believe is a business where we have many competitive advantages. We plan to use the net proceeds from this sale to reduce leverage and/or invest in travel center growth initiatives. We expect some of these growth initiatives may include expanding our industry leading truck service program and growing our nationwide network of travel centers, including investing in our recently announced TA Express travel center format and pursuing new franchising opportunities.
“Our standalone convenience stores have been a part of our business for nearly five years. We want to thank our corporate and field employees for their hard work and commitment to our customers throughout the period we have operated these convenience stores.”
The portfolio TA has agreed to sell generated earnings before interest, taxes, depreciation and amortization, or EBITDA, of approximately $24.5 million during the 12 months ended June 30, 2018. This EBITDA amount includes selling, general and administrative expenses that are directly associated with the portfolio of approximately $10.2 million for the 12 months ended June 30, 2018; TA believes it will eliminate this amount of annual expenses upon the closing of this transaction. A reconciliation of EBITDA generated by the portfolio to be sold to TA’s convenience store segment site level gross margin in excess of site level operating expenses, the most comparable financial measure prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for the 12 months ended June 30, 2018, appears later in this press release. The site level gross margin in excess of site level operating expenses of TA’s convenience store segment for the 12 months ended June 30, 2018, was $39.9 million.
Based on a total sale price of $330.8 million, TA expects to recognize an impairment charge of approximately $101.5 million in the third quarter of 2018 to recognize the convenience store business as held for sale and a discontinued operation. Based on this total sale price and the estimated expenses related to the transaction, TA expects that the net cash proceeds from this transaction will be approximately $320.1 million. The $330.8 million total sale price includes $25.8 million of estimated net working capital items that are based on balances as of June 30, 2018, that are subject to adjustment based on the actual balances of these items at or near closing, and any change to this estimated net working capital amount will affect the net cash proceeds TA receives from this transaction.
The transaction is subject to customary closing conditions.
Citigroup Global Markets Inc. is acting as exclusive financial advisor to TA in this transaction. Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal advisor to TA in this transaction.