Applegreen bails on big highway deal, opening path for Global Partners
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Private equity giant Blackstone won't be running highway rest stops in Massachusetts, after a wild saga of big-money bids, litigation, and political intrigue.
Catch up quick: In early 2024, state officials issued an RFP to operate 18 highway service plazas, many of which haven't been significantly renovated since the 1950s.
- Two experienced bidders emerged.
- One was Applegreen, an Irish company that Blackstone took private in 2021. The other was Global Partners, a Fortune 500 company based in Massachusetts.
- Each bid was worth well over $1 billion over the life of a 35-year lease, with Applegreen offering more for capital improvements and Global Partners arguing that its overall package had a much higher dollar value.
- Applegreen was picked as the winner this past June.
- Global Partners responded with a longshot lawsuit against the state, alleging conflicts of interest and public records act violations. It also launched a high-profile public relations campaign, including an incessant flurry of radio ads.
Fast forward to yesterday: Applegreen walked away, after what it called "three months of good faith negotiations" with the state.
- That likely leaves only Global Partners, which tells Axios that it remains committed to its prior bid.
The big question: Why did Applegreen bail?
What Applegreen is saying: The Blackstone-backed company claims it was unable to resolve issues that hurt the deal's "commercial viability," and cited "costly and continued litigation threats from an opposing bidder that have jeopardized the project's timeline and financing."
- The second part doesn't make much sense. There was going to need to be a legal resolution by year-end, since that's when the existing operator lease expires — and it's hard to imagine that a 3-month delay becomes the breaking point for a 35-year deal.
- The first part, however, may have merit. A source familiar with the talks says that the state insisted on several requirements that flipped net project value from positive to negative.
- For example, Applegreen would have needed to assume all environmental liabilities at the sites, which include gas stations. It also would have needed to keep all restaurants open from 5:30am-11pm seven days per week, regardless of restaurant type, and couldn't reach agreement on staffing and wages.
But there's another possibility: Global Partners didn't have much chance to win its lawsuit, unless some sort of smoking gun turned up during discovery. Maybe it did.
- There already were some chummy texts discovered between state officials and Applegreen's local development partner on the deal, although no explicit quid pro quos.
- Moreover, Applegreen's decision came just hours before a scheduled state senate hearing over the deal — although both Applegreen and state transportation officials had said they wouldn't show.
The bottom line: The story isn't necessarily over, even though Applegreen chose to exit.
Disclosure: The author has personal relationships with two people who work at Global Partners, but did not discuss this story with them.
