Billion-Dollar Duel Between Berkshire and Haslams Canceled

The much-anticipated billion-dollar court trial determining whether Berkshire Hathaway used improper accounting techniques in its purchase of the Haslam family’s minority stake in Pilot Travel Centers was surprisingly canceled in Delaware Chancery Court. Instead of a trial, the two sides have agreed to a settlement, though the terms were not disclosed to the public.

Pilot Travel Centers, the largest truck-stop chain in the U.S., is predominantly under the control of Berkshire Hathaway, led by CEO Warren Buffett. This control was brought about by several purchases, totaling $11 billion, that gave Berkshire an 80% stake in Pilot Travel Centers. The remaining minority stake is owned by the Haslam family, which had a “put option” to force Berkshire to buy out their remaining 20% within a specific annual time frame.

The Haslams had filed a suit against Berkshire Hathaway last year, accusing it of using a form of accounting dubbed “pushdown accounting,” which would devalue Pilot Travel Centers. This, according to the Haslams, would see them get short-changed in the event that Berkshire Hathaway bought out their remaining stake. On the other hand, Berkshire maintained that its use of the accounting method was fully within the framework of its agreement with the Haslams.

Adding to the contentious situation, there were claims that Jimmy Haslam, a family member who owns the Cleveland Browns football team, might have offered illicit side payments to Pilot Travel Centers’ top executives. These allegations, which were being investigated by federal prosecutors in New York, were meant to inflate the value of the Haslam family’s remaining stake in the company, forcing Berkshire to pay more than it should have.

The cancelation of the trial came just two days after a brief conference where the judge in charge of the case met with the attorneys for Berkshire and the Haslams to finalize the trial details. Greg Abel, Buffett’s designated successor, was expected to testify.

The outcome of the trial could have seen Berkshire Hathaway paying up to $1.2 billion more for the Haslam’s stake in the company than it would have if the alleged accounting methods were not used. Both Berkshire Hathaway and the Haslam family have been tight-lipped about the canceled trial and settlement.