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WESTLAKE, Ohio — TravelCenters of America LLC (TA) should sell and lease back its real estate, including convenience stores and gas stations, and spin off its vehicle repair business, activist shareholder Russell Glass wrote in a letter to the company's board of directors.
According to Bloomberg, which obtained the letter issued by Glass' RDG Capital Fund Management on Monday, the sale and leaseback of TA's fuel stations, convenience stores and vacant land could be worth $400 million, while a spinoff of its vehicle repair business could be worth an additional $300 million.
Glass believes both steps should be taken to unlock value in TA, which is undervalued compared to its peers. TA's stock was up nearly 5 percent to $13.29 in late Tuesday afternoon trading following Glass' statement.
“RDG believes TA is a highly attractive yet deeply undervalued company,” he wrote in the letter. “The company should command a premium, not discounted, valuation. We believe TA is misperceived as a slow-growth, low-margin, commodity-oriented fuel company rather than the higher margin, growing chain” of quick-service and full-service restaurants, convenience stores and truck repair facilities.
New York-based RDG is a shareholder in TA, but not did detail exactly what stake it owns in the letter. Companies or individuals are not required to reveal their stake in a business until it exceeds 5 percent of the shares.
RDG is seeking to initiate talks with TA in an effort to unlock value in its shares, the news outlet reported.
Westlake-based TA, operator of 251 travel centers, did not immediately respond to the letter.
Activist groups have played a role in encouraging other convenience store operators to make changes to their businesses. In February 2014, Concerned Pantry Shareholders, a group led by Houston investment groups JCP Investment Management LLC and Lone Star Value Management LLC, said it believed all options should be considered regarding ways to boost The Pantry Inc.’s stock. In the following months, The Pantry's stock rose significantly, culminating with the December announcement that the parent of Kangaroo Express will be sold to Alimentation Couche-Tard Inc. at a premium.
In addition, in 2013, Elliott Management Corp. encouraged Hess Corp. to sell or spin off its entire retail division. The company eventually sold its retail division to Speedway LLC in 2014.