LAVAL, Quebec -- Although the news that 7-Eleven Inc. has bid $40 per share for Casey's General Stores Inc., trumping Alimentation Couche-Tard Inc.'s $38.50 offer, has changed the game, Couche-Tard said yesterdayas reported in a Morgan Keegan/CSP Daily News Flashthat it has reached an agreement with the Federal Trade Commission (FTC) that would permit Couche-Tard to acquire Casey's if it divests 25 unnamed convenience stores and gas stations within a specified period following the closing of an acquisition of the Midwest chain.
Alain Bouchard, president and CEO [image-nocss] of Couche-Tard, did not reveal the identity of those locations. But he said, "The agreement with the FTC staff is another step towards making the combination of Couche-Tard and Casey's a reality."
He added, "We believe our revised offer of $38.50 per share in cash allows the Casey's shareholders to realize full and immediate value for their shares. The next step is for the Casey's shareholders to elect our independent nominees to the Casey's board. We believe our nominees will better represent the interests of the Casey's shareholders."
Michael Van Aelst, vice president and director of merchandising and consumer products equity research at TD Newcrest, Montreal, wrote in a note to investors: "On the surface, [the] revelation [of another interested party] could be considered a negative for Couche-Tard as it could end up driving up the price for Casey's or even pricing it out of the range necessary to hit Couche-Tard's ROIC hurdles."
He added, however, that "this development could also be viewed as a positive. First of all, Couche-Tard should be able to use this potential competing bid to encourage shareholders to support its proposed slate of independent directors. Since Casey's only appears willing to have discussions with this mystery bidder, an independent board would be more likely to open the books to all serious bidders in an effort to generate the highest return via a bidding war. Will shareholders accept Casey's decision to open its doors for discussions with one bidder but not Couche-Tard despite the bids being only $1.50/share apart?"
Aelst continued, "Secondly, given the significant lack of disclosure on this alternative $40/share bid (i.e., the bidder's name, ability to finance a transaction, conditions, etc.) it is uncertain to us how serious a bid it really is. Casey's noted that there can be no assurances that a transaction will be reached and that it may not even provide updates on the discussions with the third party. Will Casey's shareholders feel confident re-electing the current slate of directorsessentially turning their back on a firm, fully financed formal offer of $38.50/shareand relying on a preliminary $40/share offer (for which further information may or may not be forthcoming) to get firmed up?"
In response to a CSP Daily News Poll that asked, before the report that 7-Eleven was the "mystery suitor": In light of new developments, what company do you think will acquire Casey's General Stores?", most of the approximately 100 respondents by press time still did not believe Casey's will be acquired (nearly 37%). About 26% believed Couche-Tard will be the acquirer. More than 14% said that 7-Eleven would acquire Casey's. More than 8% said it would be Sun Capital Partners; more than 13% said "the new, unnamed party"; 1% said "an oil company"; and none said "other." (Please be sure to participate in today's poll.)
Casey's has 1,531 stores as of June 30, 2010. The Ankeny, Iowa-based company and its wholly owned subsidiaries operate c-stores under the name Casey's General Store, HandiMart and Just Diesel in nine Midwestern states, primarily Iowa, Missouri and Illinois. The stores carry a broad selection of food (including freshly prepared foods such as pizza, donuts and sandwiches), beverages, tobacco products, health and beauty aids, automotive products and other nonfood items. In addition, all of its stores offer gasoline.
Laval, Quebec-based Couche-Tard operates a network of 5,869 c-stores, 4,141 of which include motor fuels dispensinglocated in 11 large geographic markets, including eight in the United States (operating primarily under the Circle K name) covering 43 states and the District of Columbia, and three in Canada (operating primarily under the Mac's and Couche-Tard names) covering all 10 provinces.
(Click here for previous CSP Daily News coverage of Casey's and Couche-Tard.)
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