2 Times Casey’s Avoided Being Sold
By Greg Lindenberg on May 24, 2018ANKENY, Iowa -- Rumors about a possible sale of Casey's General Stores Inc. began circulating again this month after an “activist investor” reportedly took a stake in the convenience-store company and was said to be contemplating a push for Casey’s to put itself on the market. One analyst speculated on the likely potential buyer.
Citing anonymous sources, Bloomberg reported on May 23 that New York-based Jana Partners had invested in Casey's General Stores Inc. and was mulling a call for a sale, sending shares of the retailer’s stock up more than 7%.
Jana Partners has since denied that it had invested in Casey’s. “We do not own a single share,” a spokesperson for the hedge fund run by Barry Rosenstein told Reuters. Jana has not owned Casey’s in the past decade and has no current exposure to the chain, the spokesperson said.
Ankeny, Iowa-based Casey's, which owns and operates more than 2,000 c-stores in 15 states, did not respond to a CSP Daily News request for comment. Casey's is No. 4 in CSP's 2017 Top 202 c-store chains ranked by number of company-operated retail outlets.
Casey’s is no stranger to buyout efforts. Here's a look at two instances the retailer has muscled through as recently as this year …
1. JCP Investment Management
In January, a group of Casey’s shareholders issued an open letter to all of the chain’s investors suggesting that the chain is “significantly undervalued” and urged the board to “immediately engage a financial adviser to explore all strategic alternatives, including a potential sale, merger or similar transaction in order to maximize shareholder value.”
JCP Investment Management LLC, BLR Partners LP and Joshua E. Schechter collectively own about $45 million worth of Casey's General Stores Inc. common stock. JCP was instrumental in the sale of The Pantry Inc. to Laval, Quebec-based Alimentation Couche-Tard Inc. in 2014 and was part of a settlement agreement with San Antonio-based CST Brands Inc. that resulted in the sale of the Corner Store c-store chain to Couche-Tard in 2016.
“Casey’s board of directors and management team welcome and appreciate input from all shareholders," Terry Handley, president and CEO of Casey’s, said in a press statement responding to the Jan. 3 letter signed by James C. Pappas, managing member of investment firm JCP, Houston. "The board will review the content of their letter thoroughly.”
While JCP’s efforts did not precipitate a sale, in a March update to shareholders, Casey's outlined plans touting several key initiatives to increase profitability, improve operational performance and enhance shareholder value. It also refreshed its board.
2. Couche-Tard
In April 2010, after almost six months of mostly one-way talks, Couche-Tard went public with an effort to purchase Casey's, hoping to force the company's hand for a deal.
"We strongly believe that our $36 per share all-cash proposal is compelling for Casey's shareholders as it offers them the opportunity to realize full and immediate value for their investment," Alain Bouchard, president and CEO of Couche-Tard, said in publicly announcing the takeover bid.
Casey's president and CEO at the time, Robert Myers, countered, "Your proposal significantly undervalues Casey's and is not in the best interests of the corporation," reiterating a strong opinion he had shared earlier with Couche-Tard after its first two $36 per share offers.
Casey's board then approved a plan to prevent a hostile takeover, in the form of a shareholder rights agreement. That agreement kicks in as soon as any one shareholder obtains 15% of the company. Once triggered, the deal, among other things, gives all Casey's shareholders except the would-be acquirer the right to purchase new stock at one-half the market price.
Casey's CFO Bill Walljasper called the move "a very customary step in a hostile takeover," one that would make a deal more expensive for any purchaser.
Couche-Tard launched a second attempt in June 2010. Casey's advised shareholders "not to take any action" regarding Couche-Tard's tender offer and to wait until after the board reviewed the tender offer and made a recommendation to shareholders.
Adding more drama to the saga, in September of that year, 7-Eleven Inc., then based in Dallas, also made a bid for Casey’s, which Casey’s also rebuffed.
Also in September, Couche-Tard walked away from the $2 billion hostile bid. The takeover battle cost Casey's more than $27 million, plus a $500 million debt restructuring that allowed it to buy back 25% of its own stock.
Possible buyer?
If Casey’s is put up for sale, “Couche-Tard would be among a small group of strategic bidders,” TD Securities Inc. analyst Michael Van Aelst wrote in a research note May 24.
- Click here for speculation on other companies that could acquire Casey's if it went up for sale.
“Given the current environment (i.e., much lower interest rates and greater competition for assets) and Casey’s strong foodservice mix, we believe that Couche-Tard could be willing to pay up to $5 billion to $5.5 billion (10x to 11x trailing EBITDA of $506 million), though this may not be enough of a premium to satisfy Casey’s shareholders,” he said.
Couche-Tard dropped its 2010 bid for Casey’s after the company rebuffed its final offer valued at approximately 8x trailing EBITDA, said Van Aelst.
Casey’s rural Midwest network has only “modest” overlap with Couche-Tard’s, he said, and “Casey’s locations and extensive foodservice experience and expertise are still believed to be attractive to Couche-Tard.”
He also said that synergies “would not likely reach the levels generated with The Pantry and CST, given that Casey’s is believed to be better managed. Nevertheless, we still see the potential for synergies in the 40% to 50% range.”