As reported in a Morgan Keegan/CSP Daily News Flash, Casey's alleges a market-manipulation scheme [image-nocss] perpetrated by Couche-Tard in an attempt to acquire all outstanding shares of Casey's stock at an artificially deflated price.
Couche-Tard had accumulated a stake of 1,975,362 Casey's shares, which represented approximately 3.9% of the issued shares of Casey's. After announcing its offer to purchase all Casey's shares on April 9, Couche-Tard promptly sold nearly all of its shares at a price of about $38.73 per share, the complaint says, according to a report from AM Law Daily. Couche-Tard made about $10 million by taking advantage of the bounce in Casey's share value linked to the announced offer, but by selling in bulk, Couche-Tard also depressed the size of the gain Casey's stock price would otherwise have achieved on the news of the bid, the lawsuit says.
Casey's claims its stock price would have jumped above $40; instead, it has since settled at about $36 per share, which, according to Casey's, gives the Couche-Tard offer a legitimacy it doesn't deserve, according to the report.
"We believe this lawsuit is entirely without merit and we will vigorously defend against these baseless claims," Couche-Tard responded Friday afternoon. "We are disappointed that the Casey's Board of Directors has chosen to precede down this path, which we believe is designed to distract Casey's shareholders from focusing on the real issueour all-cash, premium bid for Casey's."
In its lawsuit, however, Casey's is seeking the following relief:
A declaration that Couche-Tard's April 9, 2010, sale of Casey's stock with the intent to artificially depress the market price of Casey's stock was in violation of Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated there under. A declaration that Couche-Tard's April 9, 2010, announcement of its intention to make a tender offer for Casey's shares, without disclosing the fact that it held nearly 2 million shares of Casey's stock and intended to sell its Casey's holdings after its announcement in order to reap illicit profits and to artificially depress the market price of Casey's stock, was in violation of Section 14(e) of the Exchange Act, and Rule 14e-8 promulgated there under. An injunction barring Couche-Tard from taking further steps to consummate the tender offer and from purchasing shares of Casey's; and certain other relief. AM Law Daily reported that merger and acquisition experts were not surprised by the lawsuit. "Litigation of this nature is run-of-the-mill in hostile transactions," Daniel Wolf, a partner at Kirkland & Ellis, told the publication. "But it's somewhat unusual for a potential buyer to be trading in and out of the stock of the target company" around the time of a public offer.
Added writer and former investment banker John Jannarone in a Wall Street Journal opinion piece, "The question is whether Couche-Tard should be allowed to get a free hedge at the expense of other investors. Indeed, some have sold since Couche-Tard's unusual trades were made public last week, with Casey's shares sliding back below $36. When acquirers can exploit deal mania with such precision, investors are probably right to step back."
Alimentation Couche-Tard Inc., Laval, Quebec, operates a network of 5,883 convenience stores located in 11 large geographic markets, including eight in the United States covering 43 states and the District of Columbia, and three in Canada covering all 10 provinces.
Casey's General Stores, based in Ankeny, Iowa, has 1,513 corporate stores in 11 states.
(Click here for previous CSP Daily News coverage of the Couche-Tard and Casey's saga. Andclick here to see what others are saying about the takeover bid.)
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