Author Topic: Berkshire aquisition of Pilot Flying J - long term 80 per cent  (Read 3020 times)

John Hjorth

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Berkshire aquisition of Pilot Flying J - long term 80 per cent
« on: October 04, 2017, 12:06:53 PM »
Placeholder for discussion of the Berkshire Pilot Flying J aquisition.

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Quite some posts about this Berkshire aquisition in the general news topic as by now. I think it deserves its own separate topic.
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longinvestor

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Re: Berkshire aquisition of Pilot Flying J - long term 80 per cent
« Reply #1 on: October 04, 2017, 12:10:02 PM »
Guesses on how much did they pay? Multiple of what(cashflow, sales, earnings) ?

xo 1

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Re: Berkshire aquisition of Pilot Flying J - long term 80 per cent
« Reply #2 on: October 04, 2017, 12:39:12 PM »
Placeholder for discussion of the Berkshire Pilot Flying J aquisition.

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Quite some posts about this Berkshire aquisition in the general news topic as by now. I think it deserves its own separate topic.
The economics are still to be determined, but I was surprised that BRK would touch Pilot after the criminal trouble the company ran into cheating customers of rebates.  Haslam has not yet been charged, so likely won't, but the pleas ran to nearly the top of the corporate chain and with the summer plea bargains in exchange for cooperation, I had thought there may be more charges forthcoming.  Maybe BRK has reason to believe the matter is concluded.  In fact, maybe that's part of the timing of the deal. 

gg

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Re: Berkshire aquisition of Pilot Flying J - long term 80 per cent
« Reply #3 on: October 04, 2017, 01:29:04 PM »
The economics are still to be determined, but I was surprised that BRK would touch Pilot after the criminal trouble the company ran into cheating customers of rebates.  Haslam has not yet been charged, so likely won't, but the pleas ran to nearly the top of the corporate chain and with the summer plea bargains in exchange for cooperation, I had thought there may be more charges forthcoming.  Maybe BRK has reason to believe the matter is concluded.  In fact, maybe that's part of the timing of the deal.

I know that people want to believe that Warren and Charlie only invest in morally impeccable businesses, but between DVA, HCG, and this... Just like anyone else, a good deal is the overriding concern.

John Hjorth

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Re: Berkshire aquisition of Pilot Flying J - long term 80 per cent
« Reply #4 on: October 04, 2017, 03:06:12 PM »
gg & xo 1,

Sound sceptisism has never hurt anyone. There was a link to an interview with Mr. Buffett here on CoBF yesterday, where Mr. Buffett mentioned, that he was aware of that case.

Do you have some sources to share, to drag us all out of our ignorance?
« Last Edit: October 04, 2017, 03:16:40 PM by John Hjorth »
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

John Hjorth

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Re: Berkshire aquisition of Pilot Flying J - long term 80 per cent
« Reply #5 on: October 06, 2017, 08:47:02 AM »
I have tried to find some financial data about the company, but basically to no avail.

The only thing I found was this page on Forbes.

I suppose the company has a lot of real estate on its balance sheet.

Furthermore, I have been thinking about the accounting treatment of this investment. With an ownership stake at approx. 39 per cent, I think it will be one line consolidation as accounting principle, like for KHC, but not with a separate line in the Berkshire group balance sheet because of its minor size.
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

rb

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Re: Berkshire aquisition of Pilot Flying J - long term 80 per cent
« Reply #6 on: October 06, 2017, 09:02:31 AM »
Furthermore, I have been thinking about the accounting treatment of this investment. With an ownership stake at approx. 39 per cent, I think it will be one line consolidation as accounting principle, like for KHC, but not with a separate line in the Berkshire group balance sheet because of its minor size.
Normally this acquisition would be accounted under the equity method. However in this case I think the accounting method will be determined by the nature of the contract under which the extra shares will be required. This is really going deep, deep into GAAP minutia and I don't think anyone can tell how it will be accounted without seeing the actual agreement.

John Hjorth

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Re: Berkshire aquisition of Pilot Flying J - long term 80 per cent
« Reply #7 on: October 06, 2017, 09:38:37 AM »
Good points, rb. Thank you for sharing.
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

xo 1

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Re: Berkshire aquisition of Pilot Flying J - long term 80 per cent
« Reply #8 on: October 08, 2017, 02:50:53 AM »
gg & xo 1,

Sound sceptisism has never hurt anyone. There was a link to an interview with Mr. Buffett here on CoBF yesterday, where Mr. Buffett mentioned, that he was aware of that case.

Do you have some sources to share, to drag us all out of our ignorance?
Here is a link to a Department of Justice news release: https://www.justice.gov/usao-edtn/pr/pilot-flying-j-enters-criminal-enforcement-agreement

Here is a link to a local Tennessee paper with an update:  http://www.knoxnews.com/story/news/crime/2017/07/25/whos-still-headed-trial-pilot-flying-j-case/506800001/

I live in Cleveland (where Mr. Haslam owns the NFL Cleveland Browns), so it was a very large story locally. 

With respect to BRK investing in other ethically questionable companies, perhaps, although I believe Pilot is different than buying a publicly traded stock in that this will be a wholly owned subsidiary eventually and the case is still playing out.  As best I can tell, the initial thoughts that criminal charges would reach the CEO and ownership are not going to play out.  Perhaps WEB knows enough to say for sure.  But that was the biggest surprise from my perspective - this could end up with BRK buying into a private business where it needs promptly to replace management and that I didn't see that discussed by analysts.  And it could be that the risk is priced into the deal, but until we know pricing for the deal, I don't know what to make of that.   

scorpioncapital

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Re: Berkshire aquisition of Pilot Flying J - long term 80 per cent
« Reply #9 on: October 08, 2017, 02:56:27 AM »
omaha herald says flying j is worth 9 billion so 80% is 7 billion (38.6% of that was the down payment).