Warren Buffett’s Berkshire Hathaway Inc (NYSE:BRK.B) has settled a legal dispute with the Haslam family over the buyout terms of Pilot Travel Centers, averting a trial that was set to begin on Monday.
The settlement resolves allegations that Berkshire Hathaway altered accounting methods in a way that would disadvantage the Haslam family in their remaining 20% stake in Pilot Travel Centers.
Berkshire Hathaway acquired an 80% stake in Pilot Travel Centers, owned by billionaire Jimmy Haslam, for more than US$10 billion in two separate deals in 2017 and 2023.
However, disagreements arose over the accounting practices used to value the Haslam family's remaining 20% stake in the company.
According to the Haslams, Berkshire’s accounting methods were aimed at reducing the value of the company, thus impacting the amount Berkshire would owe if the family chose to sell their remaining stake in 2024.
The Haslams believed their 20% stake in Knoxville-based Pilot was worth US$3.2 billion before Berkshire's accounting change, a valuation disputed by Berkshire.
In a countersuit filed in November, Berkshire Hathaway accused Jimmy Haslam of attempting to bribe Pilot executives with millions of dollars.
This alleged bribery was purportedly to inflate the company’s earnings in 2023, impacting Pilot's long-term value.
A court docket filed on 28 November 2023 stated: “After Berkshire took control of PTC in January 2023, Jimmy Haslam secretly promised massive side payments, from his own pocket, to at least (an undisclosed sum of) high-level PTC employees to induce them to prioritise PTC’s short-term 2023 earnings over PTC’s long-term value.
“The purpose and effect of Haslam’s disloyal scheme was to artificially boost PTC’s 2023 earnings, which dictate Pilot’s 2024 payout - and to do so in an insidious and largely undetectable way.”
Both parties accused each other of using accounting tricks to manipulate Pilot's EBIT, which was crucial in determining the value of the Haslam family's stake.
The settlement, details of which have not been publicly disclosed, puts an end to the litigation, including all claims and counterclaims between the involved parties.