Casey's Rejects Buyout Offer

JON SPRINGER

ANKENY, Iowa — The convenience store industry last week was still waiting for the next shoe to drop in a developing standoff between Casey's General Stores and a larger Canadian counterpart, Alimentation Couche-Tard.

The board of directors of Casey's here rejected a hostile takeover attempt from Couche-Tard, saying the $1.9 billion offer “vastly undervalues Casey's and our future prospects.”

Couche-Tard's offer of $36 per share — a 14% premium on Casey's closing share price — came to light after Casey's board twice rejected private buyout offers from Couche-Tard.

Couche-Tard is the largest independent convenience store operator in North America with more than 5,800 stores. Casey's operates more than 1,500 stores and posted annual sales of $4.7 billion in the fiscal year ended April 30, 2009.

“We are committed to pursuing this transaction and are prepared to take all necessary steps to make this combination a reality,” Alain Bouchard, Couche-Tard's president and chief executive officer, said in a statement.

Karen Short, a New York-based analyst for BMO Capital Markets, who follows Casey's, said that the chain is likely worth more than the Couche-Tard offer, citing Casey's real estate portfolio, low debt levels and industry-leading margins. Casey's sells private-label gasoline and operates an advanced prepared-food program. Short added, however, that the offer would pressure the company to demonstrate it can turn those advantages into shareholder value.

Casey's last week reportedly made an acquisition of its own, buying 10 Holiday Station Stores in Nebraska and Iowa.

Some analysts last week said they believed Couche-Tard would eventually prevail, citing a lack of options for Casey's. It was not clear late last week whether Couche-Tard would raise its offer, however, especially after debt rating service Moody's said it would review the company for a downgrade given estimates of its debt ratio following the proposed acquisition.

Casey's stock in the meantime had risen to around $39 per share, as investors anticipated a higher offer.

Short noted that Couche-Tard has until June to nominate members for election to Casey's board of directors.