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Trifthorn Capital Case Summary

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Trifthorn Capital Case Summary
Executive Summary:
The following is an analysis of the Travel Centers of America (TA) and recommended best investment strategies as Trifthorn Capital pertains to additional investment opportunities. Based on HPT-TA deal structures and where we believe our investors to be headed we recommend the following actions:
• Holding New-TA stocks you received in the spinoff
• Buying shares in New-TA in addition to the stocks received from spinoff

In this memo, we would analyze the HPT share holders' benefit from acquisition, noting that the company's restructuring plan have allowed Travel Centers of America to run business without being exposed to financial risk from high leverage or less cash.
We will then analyze the deal structure by comparing …show more content…
To preserve its tax free status, a REIT has to collect all of its income and has all of its assets in real estate. Second, HPT could make stable revenue structure. Since hotel industry is highly cyclical, HPT was in need to buy new investment portfolio which can offsets revenue fluctuation. As a nation's leading service travel centers, Travel Centers America had well diversified business and has made relatively stable gross profit. By acquiring TA and spun it off, HPT is expecting to receive $170millions of annual rent income for 16years. Third, from this deal, shareholders of HPT would be benefited to own shares in two companies further expecting more dividends while creating a captive stream of rentals from the Travel Centers …show more content…
Among two comparable multiples, we used 9.5 times multiple from comparable CASY because CASY's General Stores owned the real property which is used for operation just like the Old-TA. In our discounted cash flow model, the fair value of Old-TA (before acquisition) is $1.7billion with 7.7% of cost of capital. To arrive at our valuation, we consider Pro Forma Balance Sheet as basis and subtract post acquisition items such as $213million from HPT from Cash and Shareholder's Equity and $105million capital lease obligation from Liabilities. Based on our scenario, we believe that $1.9billion of acquisition price HPT paid for this transaction seems little bit positive but is understandable. (Exhibit
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