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WESTLAKE, Ohio — RDG Capital Management sent a letter to TravelCenters of America LLC’s (TA) board of directors Tuesday asking the travel stop and convenience store operator to immediately buy back $100 million of its stock in an effort to boost its share price.
In the letter, signed by RDG Managing Partner Russell D. Glass, the private investment firm commended TA for making recent moves, namely its sale-leaseback of 30 travel centers to Hospitality Properties Trust for $397 million in June. TA subsequently purchased five travel centers from the real estate investment trust for approximately $45 million, leaving the chain with net proceeds of $352 million.
“However, RDG believes the labyrinth of complex sale-leaseback transactions has led to investor confusion, which has caused the company’s share price to remain significantly undervalued,” Glass wrote in the letter.
RDG added that TA’s shares have traded at a recent price-to-earnings (P/E) multiple of 12.9 times, vs. a P/E multiple of 23.1 times for the convenience store peer group. A $100-million share buyback could boost TA’s stock price by more than 33 percent to $17 per share, the investment firm stated.
According to RDG, TA owns more than $400 million worth of real estate that should provide a “significant source of future liquidity to replenish cash spent on an opportunistic stock buyback.”
“We respectfully ask the board to seriously consider this recommendation and act quickly to take advantage of the company’s mispriced stock for the benefit of all shareholders,” Glass wrote. “We would be glad to speak with you regarding this matter at your earliest convenience.”
New York City-based RDG Capital Fund Management manages investment funds that primarily focus on undervalued companies with identifiable catalyst opportunities to enhance shareholder value.
Westlake-based TravelCenters of America operates 252 travel centers and 79 gasoline stations and convenience stores in 43 U.S. states and Canada, operated primarily under the TravelCenters of America, TA, Petro and Minit Mart brand names.
The company did not immediately respond to the letter.
Shares of TA rose more than 1 percent Tuesday afternoon on the New York Stock Exchange following the release of the letter.