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    Flying J, Pilot Merger Crosses Another Threshold

    Companies can proceed to next step now that Pilot completed due diligence.

    OGDEN, Utah and KNOXVILLE, Tenn. -- The merger between truck stop operators Flying J and Pilot Travel Centers crossed another major threshold with Pilot completing its due diligence, The Trucker News Services reported.

    The successful completion of due diligence is a significant stepping stone since Pilot, after extensive review and analysis of Flying J's business, finances and legal affairs, agrees that it is willing to proceed with the deal unless there is a Material Adverse Change. Likewise, Flying J is willing to proceed to the next step, the Acquisition and Stockholders Agreements. These documents outline the transaction and anticipate future problems and remedies, according to the report.

    The Acquisition Agreement has standard boiler plate provisions, but there are several interesting aspects, according to The Trucker News Services. For example, both parties "endeavor to structure the transaction in the most tax-efficient manner possible, which is important because the Flying J shareholders do not want to pay cash taxes if they do not receive cash, and the IRS does not want to own Pilot stock.

    With respect to antitrust issues, both Pilot and Flying J agree to work together in "good faith" to solve any antitrust issues. This may include the divestiture of certain locations where the government believes the combination of locations significantly lessens competition, the report stated.

    The Stockholders Agreement is essentially designed to protect the rights of Flying J after the merger. The agreement will contain covenants against affiliated transactions, and Flying J will have representation on the board of directors depending on the level of ownership. It will also grant Flying J certain rights so it can sell its shares in a public offering, plus there are also provisions that permit Flying J to sell a portion of its shares to Pilot and permit Pilot, after six years, to buy the shares owned by Flying J.

    At the closing, Flying J can require Pilot to buy $15 million of stock. On the other hand, for one year after the closing, Flying J can buy $200 million of equity at the price established at the closing, the report noted.

    After the closing, there will be three major shareholders: the Haslam Family, which currently owns 52.5 percent; CVC Capital Partners; and Flying J. The post-closing ownership percentages are not yet determined, according to the news service.

    With the completion of the Acquisition and Stockholders Agreements, which should not present a major problem, the Exclusivity Period will be extended to Oct. 31. Upon the receipt of the "Specified Consents" (primarily from ConocoPhillips and Shell Oil) by Oct. 31, the Exclusivity Period will be extended to the Drop Dead Date.

    Provided there is not a Material Adverse Change, the major hurdles to the completion of the merger are antitrust approval and the arranging $300 to $500 million of debt financing, The Trucker News Services reported.

    Related News:

    Court Approves Flying J/Pilot Merger

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