Casey's stock has since risen [image-nocss] above $39 on speculation that a higher offer might do the trick, said the report.
Analysts say the timing of the Couche-Tard bid was prompted by the difficult operating environment for U.S. convenience stores right now. Weaker sales growth in the wake of the recession makes valuations look a little more affordable for a potential buyer, the newspaper said.
So far, Casey's has not been willing to negotiate with Couche-Tard, but that might change if a sweeter deal was forthcoming. No other buyers appear ready to knock on the door, said the report.
"We anticipate that the acquisition will be realized given the limited options available to Casey's shareholders," wrote Desjardins Securities analyst Martin Landry in a note to clients.
Yesterday's CSP Daily News reported on speculation that players such as Sun Capital Partners Inc. or even 7-Eleven Inc. could be among the only candidates positioned to step in to acquire Casey's. (Click here for coverage, including analyst insights into how much Couche-Tard or another bidder would have to offer to get the deal done.)
Readers of CSP Daily News are still not convinced that the a deal will occur. Monday's poll, currently with nearly 220 respondents, is still running about 60-40% against Couche-Tard being successful in its takeover attempt. And at press time, of the more than 170 responses to yesterday's poll"Who do you think will buy Casey's General Stores?"about 44% say none, and nearly 38% say Couche-Tard. Meanwhile, about 9% say 7-Eleven; about 6% say other; and about 3% say Sun Capital Partners.
The Gazette asked, "Would a takeover make sense for Couche-Tard, which until now has been quite conservative in its U.S. acquisition strategy?"
The offer for Casey'srepresenting a 14% premium over the share price last weekvalues the target at a higher multiple than Couche-Tard is usually willing to pay, Landry said.
For example, the valuation is 20% more than Couche-Tard paid for Circle K, its last big acquisition in the United States.
Landry said he believes the premium is warranted, given the quality of the assets that would be acquired. "Casey's business model, with a geographic focus on small towns, appears attractive to us given the limited competition. In addition, the company has developed one of the most successful foodservice offerings in the industry."
One potential hiccup, said the reportthe already indebted Couche-Tard has been placed under review for downgrade by Moody's Investor Service because its debt ratio would jump significantly in order to finance the purchase.
It is unclear currently what synergies could be achieved in a takeover, the paper said, and that could affect the financial return for Couche-Tard shareholders.
According to Landry, if Couche-Tard has to raise its offer, and given its already high leverage, there is a likelihood the firm will need to issue more stock. That could dampen the potential value that would accrue to shareholders, said the report.
CIBC World Markets analyst Perry Caicco assumes synergies of $50 million in the first year. Even if Couche-Tard agrees to pay $39 a share, the analyst figures the acquisition would still add 21 cents a share of profit, the Gazette said.
And the deal would provide Couche-Tard with a foothold in the U.S. Midwest, where its presence has been weak, the report added.
(Click here for previous CSP Daily News coverage of the Couche-Tard/Casey's "dance.")
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