"Because we want to buy Casey's, and it's a great fit for our geography," Couche-Tard president and CEO Alain Bouchard told CSP Daily News. "We think we can add value to Casey's stores and we can duplicate the Casey's model in our rural stores, certainly with their foodservice [image-nocss] model. It's a very,very well-managed company and that's why we insist and we want to buy."
As previously reported in CSP Daily News, Couche-Tard launched on Wednesday an all-cash tender offer for all of Casey's outstanding shares at a previously announced price of $36 per share, subject to certain conditions (one of which is the waiving of Casey's poison pill action aimed at souring the $1.9-billion deal). (Click here for previous coverage.)
Couche-Tard also indicated that unless Casey's board of directors is willing to negotiate and enter into a merger agreement with Couche-Tard, it intends to nominate and solicit proxies for a new slate of nine independent directors to be voted on at Casey's 2010 annual meeting in September.
Casey's has not spoken with Couche-Tard execs since taking its desire to purchase the cahin public in early April. While Bouchard and his team would welcome an opportunity to discuss the proposed acquisition with Casey's leadership, it is just as intent to chip away at a deal until all the I's are dotted and the T's are crossed.
"As time goes on, I think we'll get closer and closer to achieving the goal that we have," said Couche-Tard CFO Raymond Pare.
The deal would add more than 1,500 stores mostly in the Midwest to Couche-Tard's already ample stable of 5,883 stores, bringing its total store count to 7,390, 5,353 of which would be in the United States.
Within its investor presentation, Couche-Tard outlines the following integration strategy points:
Couche-Tard's decentralized business model will allow it to run Casey's as a standalone business unit. No significant capital expenditures will be required to integrate Casey's. Casey's store banner will remain in place (no rebranding/remodels required) and will continue to be grown as a rural store format in the U.S. Midwest region. There is a possibility to leverage Casey's wholesale and distribution capabilities. There is a possibility to implement best practices from Casey's and Couche-Tard. But suppose Couche-Tard can't close the deal? Bouchard's not ready to consider that possibility.
"We are committed to making this deal, so we cannot speculate about what will happen if it doesn't happen," he said.
Added Pare without a hint of hyperbole, "We're focused on this transaction, and we have the intention to close it."
Couche-Tard chief operating officer Brian Hannasch is a bit more tactful. "We do have 700 stores in the Midwest, so we're committed to that part of the country and we'll continue to do what we do there," he said, adding, however, "We hope that [Casey's] management picks up the phone and that we can bring two good companies together."
When asked in April, "Do you think Couche-Tard will be successful in its attempt to purchase Casey's General Stores?", 41% of respondents to a CSP Daily News Poll answered yes. Asked a similar question yesterday, that response rate increased to 66%.As for stock analysts, none were surprised by Couche-Tard's tender offer. How it might progress, however, opened a couple of opinions.
About yesterday's tender, stock analyst Martin Landry of Desjardins, Montreal, said in a research note:
"[The] announcement is not surprising as it reflects the logical next step in Couche-Tard's goal to acquire Casey's," said stock analyst Martin Landry of Desjardins, Montreal, said in a research note. "We continue to view the potential acquisition positively, even under a scenario where Couche-Tard would have to raise its offer price. Assuming a purchase price of US$39/share and yearly synergies of US$60 million, the transaction could be accretive by US$0.27/share."
Wrote Michael Van Aelst, an analyst with TD Newcrest, Montreal: "Given Casey's board's refusal to negotiate with Couche-Tard, we would have to assume that the poison pill will not be waived and that the next step will be for Couche-Tard to try to replace Casey's directors with a new independent group. That would suggest that Casey's would have until September to come up with a superior offer/proposal. Investors would then have to weigh the benefits of the alternative offer (which may not exceed Couche-Tard's current offer) against the time-frame necessary and the associate risk to close a deal with Couche-Tard."
Alimentation Couche-Tard Inc., Laval, Quebec, is the leader in the Canadian convenience store industry. In North America, Couche-Tard is the largest independent convenience store operator (whether integrated with a petroleum company or not) in terms of number of company-operated stores. Couche-Tard 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 innine states.
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