Berkshire, Haslams settle suits, avoiding trial over valuation of Pilot Travel Centers

On the day the legal battle between the founding family of Pilot Travel Centers and its current owner Berkshire Hathaway was to go to trial in Delaware, the two sides reached a settlement.

In a brief statement released early Monday, a spokeswoman for the Haslam family said the two sides had reached a deal and are ending all litigation over the issue.

The Haslams had originally sued Berkshire, which then filed a countersuit. Patriarch James A. Haslam II founded Pilot Travel Centers (PTC) and has been selling it off in pieces to Berkshire Hathaway since a first purchase by Berkshire of 38.6% of Pilot in 2017. 

“Pilot Corporation … and the Haslam family, is pleased to announce that it has reached an agreement to fully settle the Delaware litigation between the Company and Berkshire Hathaway Inc., Pilot Travel Centers, LLC, and National Indemnity Company, including the dismissal of all claims and counterclaims against each other,” the statement said. Pilot Corp. is the Haslams’, and Pilot Travel Centers, the largest chain of truck stops and travel centers in the country, is the operating entity now owned by Berkshire Hathaway. 

The trial between the two sides was to begin Monday in Delaware Chancery Court.

There were no other details provided. It is unclear if the settlement involves the elimination of “pushdown accounting” that was adopted by Berkshire in early 2023 to value PTC, which Berkshire took control of early last year after the acquisition of 41.4% of the travel center chain. The Haslams’ spokeswoman offered no further comment.

It was that financial step that led to the dispute and litigation between the two sides. The Haslams said the accounting would reduce the value of PTC, which would reduce the price Berkshire Hathaway would pay for the remaining 20% of PTC. However, the lawsuit also said that the elder Haslam had been told by Berkshire Hathaway CEO Warren Buffett that the valuation of the 20% stake would be done under accounting rules agreed upon in the earlier sale of the company, which would not be on the basis of pushdown accounting. But that assurance apparently was not enough for the Haslams, leading to the lawsuit.

Berkshire’s counterclaim was mostly that Jimmy Haslam III was making ostensible bonus payments to PTC executives loyal to him without the knowledge of current PTC management, which had come out of Berkshire Hathaway. Haslam III is the son of James Haslam and was CEO and president of Pilot.

The Berkshire charge was that Haslam’s goal was to have family loyalists still at the company take steps that might give a short-term boost to profits at PTC but that could possibly have negative longer-term implications for PTC.

With the litigation out of the way, the biggest remaining question is whether the Haslams, as Pilot Corp., will exercise what amounts to a put option that will trigger a sale to Berkshire Hathaway of the 20% it doesn’t own already. The formula for determining the value of PTC is 10 times its earnings before interest and taxes, though there are some other adjustments. 

Court filings in the case said the “put right” must be exercised within 60 days following the close of the PTC fiscal year, which is Dec. 31. If it isn’t exercised this year, the right rolls over to 2025. 

Various references in the court documents suggested that both sides expect the put right to be exercised this year.

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