16 February 2019
PFJ has transformed its operations to become a travel center in a bid to ride the self-drive tourism tide. Photo:
PFJ has transformed its operations to become a travel center in a bid to ride the self-drive tourism tide. Photo:

What Buffett’s latest acquisition tells us

Although people are spending more time and money online, that does not mean the offline economy is dying. Billionaire investor Warren Buffett’s latest purchase of a stake in Pilot Flying J (PFJ) shows there are still plenty of opportunities in traditional businesses.

Buffett’s Berkshire Hathaway has agreed to acquire 38.6 percent of PFJ, the owners of the Pilot Flying J chain of truck stops.

PFJ, previously Pilot, started in 1958 as a gas station in Gate City, Virginia. As of 1978 it owned more than 100 gas stations, where truck drivers could refuel, eat and shop. Since the ’80s, it became increasingly hard for the company to compete with bigger rivals, so the company transformed its operations to become a travel center in a bid to ride the self-drive tourism tide.

It acquired Flying J in 2009 and changed the group’s name to PFJ. The firm currently operates over 750 travel centers across the United States and Canada, with annual revenue of more than US$20 billion. It’s ranked 15th on Forbes’s privately-held company list, even ahead of companies like Bloomberg.

Berkshire is acquiring the 38.6 percent stake from the Haslam family and institutional investors, and will gradually increase its stake to 80 percent by 2023. Financial terms of the deal has not been disclosed, but market estimates put PFJ’s value at about US$10 billion.

Berkshire acquired BNSF Railway for US$29 billion in 2009, and spent over US$10 billion on stocks of four US airlines. Like PFJ, these companies are in traditional businesses that cannot be replaced by the internet. Rather, the booming internet economy is actually bringing them more business.

For instance, online shopping has badly hurt many shopping malls and brick-and-mortar retailers. But all these goods purchased online have to be manufactured and transported. Thus, logistics demand in the production and delivery process will increase even as more consumers shift to online shopping.

Meanwhile, new technologies have brought us unprecedented convenience and enjoyment. But humans still need social interaction, experiences and explorations. That can’t be replaced by virtual reality. By saving time and money, people might actually spend more on things like travel, benefiting companies like PFJ.

Self-drive tours are becoming popular in China. The market badly needs a one-stop service for renting a car, buying insurance, planning the itinerary and shopping for the trip.

Imagine if Buffett can bring PFJ to China; it could be a very profitable business since many of China’s tourist attractions often become overcrowded during holidays.

By offering more comprehensive travel support, PFJ could cultivate less known destinations into new tourist spots.

This article appeared in the Hong Kong Economic Journal on Oct. 6

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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