(Click here for previous CSP Daily News coverage of Casey's and Couche-Tard.)
Couche-Tard has certainly spotted this issue, said the report. Responding to Casey's announcement, the Canadian company said, "We are pleased that Casey's is now in 'Revlon' mode given that the Casey's board of directors has finally made the decision to put the company up for sale."
According to the report, "Revlon" is shorthand for a Delaware standard requiring that the board of directors of a company engaging in a change of control or breakup is charged with obtaining the highest price reasonably available. Playing the Revlon card shows that Couche-Tard is trying to ensure that it has a place in any sales process, and is not simply shut out while Casey's cuts a deal with a preferred suitor, the newspaper said.
But there are several problems with Couche-Tard's argument, the report said. First, no Iowa court has adopted Revlon as a standard applicable to corporations organized under the state's laws. Casey's is one such company and is therefore not subject to Delaware law on this matter.
No Iowa court has ever considered this issue, but should one do so, it would likely reject Revlon or refuse to apply it here because of a constituency statute that Iowa has adopted. This allows the board of an Iowa company to consider constituencies other than shareholders, including employees and suppliers, in deciding whether to accept a takeover offer. The statute specifically provides that a board may reject a proposal based on these factors, said the paper.
This appears to let the board reject a proposal even if Revlon duties were to apply, it added. Casey's press release spoke of a transaction in the "best interests of Casey's, its shareholders and other constituencies." The company will rest any rejection of a Couche-Tard offer on the interests of these other constituencies, the Times said.
But this raises the second problem with Couche-Tard's statement, said the report: An Iowa court likely will not even get this far. The court would instead likely reject applying Revlon in its entirety, as have courts in states like Connecticut and Wisconsin where similar constituency statutes exist. These other courts have found that the statutes mitigate against Revlon's price-maximizing requirement. There's no reason to think that an Iowa court would find differently, the paper said.
And there is the third barrier to Couche-Tard's case, said the Times. Even if a court were to find that Revlon duties would apply here, it is not clear that Casey's board has triggered these duties. Revlon applies only if the board has engaged in a change-of-control transaction. Here, Casey's merely said it was "exploring" this new proposal. The lawyers were careful to ensure that they could rebut Couche-Tard's charge that the company was in sales mode.
"As things now stand, Couche-Tard's attempt to box Casey's in a corner is a nice try, but not based on current law," said the report. "It's more likely that the Revlon allusion was a public relations attempt to ensure that Couche-Tard is also at the table as Casey's begins talks with the third party."
The paper added, "People question whether Casey's announcement is real or just an attempt to distract shareholders as the upcoming board election looms. The disclosure certainly throws uncertainty on the process, which will likely benefit Casey's. To the extent that shareholders would vote based on the belief that Casey's is now in a sales process, they should think again.
Casey's still has the power to say no to both proposalsor to pick one as its preferred bidder. Unless new directors are voted in, the current board controls this process. That is just what Iowa law intended."
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