A NEWS ANALYSIS
That 800-pound gorilla appears to be almost ready to descend on the trucking industry.
In July 2009, Flying J and Pilot Travel Centers agreed to create an “800-pound gorilla” that would control about 20 percent of the “on road” diesel market through its 600 combined locations.
The combination of these two large truck stop operators was scheduled to be completed by March 31, which was extended by mutual consent to April 30.
Now, according to a June 10 article by Paul Beebe in The Salt Lake Tribune, July 31 appears to be the closing date for the completion of the merger and Flying J’s exit from bankruptcy (click here to read the article).
While the companies are not talking on the record, it appears that the major issue is the Federal Trade Commission and its concerns about the market power of the 800-pound gorilla.
Of course, this is a very real concern for the many industry participants, whether they are competitors, suppliers or trucking company customers.
Without the blessing of the FTC, Flying J will have a difficult time emerging from bankruptcy because it will not have the cash from the Pilot transaction to repay its creditors.
And while Flying J has made considerable progress in raising cash by selling Longhorn Pipeline, its oil and gas assets, the Bakersfield refinery and other miscellaneous assets, it may not have the ability to go it alone.
Today, the financing markets are still not overly receptive to leveraged transactions, especially in this competitive industry where first quarter fuel margins have declined about 25 percent to about 10 cents a gallon compared to the previous year.
As a result, there are numerous rumors flying around, at least one of which have been confirmed by any reliable sources.
The most prevalent is that there is no way that the Obama administration is going to approve any deal for these two Red State companies involved in the oil industry, especially since the FTC is being supplied with inside information from competitors, customers and suppliers.
On the other hand, there is rumor to the effect that in order to get the blessing of the FTC, the combined entity is actively negotiating to sell numerous locations (and not just the dogs or poor performing locations) to competitors such as Loves Travel Stops and Country Stores, Petro Stopping Centers and TravelCenters of America, and other smaller chains or independents.
In addition, reliable sources have told The Trucker that pink slips are being handed out in Salt Lake City to long term Flying J corporate employees, effective Friday, August 6, a sure sign that merger will be completed by the end of July.
What are the odds that Flying J and Pilot will complete this deal? Who knows? Too bad Las Vegas is not taking bets on this roll of the antitrust dice.