Because of its reputation as a serial acquirer, Alimentation Couche-Tard Inc., with its global Circle K brand, is the leading candidate to acquire Casey’s, according to widespread industry speculation.
With nearly 8,000 U.S. c-stores following the recent acquisitions of about 1,300 stores from CST Brands Inc., and more than 500 from Holiday Stationstores, the Laval, Quebec-based company is squaring off against 7-Eleven Inc. for supremacy in size. 7-Eleven expects to complete its acquisition of 1,100 Sunoco c-stores early this year. When it does, it will have approximately 10,000 U.S. c-stores. A Casey’s acquisition by Couche-Tard would essentially tie the game.
“Casey's 2,000 stores across 15 states are mostly in small rural, Midwest towns, so the overlap with Couche-Tard's network is believed to be modest,” Michael Van Aelst, analyst for TD Securities Inc., Toronto, said in a research note. “Moreover, Casey's locations and extensive foodservice experience/expertise could still be attractive to Couche-Tard.”
It would also be Couche-Tard’s second go at Casey’s. In a very rare exception to its long, successful history of acquisitions, Couche-Tard abandoned a hostile bid for Casey’s in 2010 after Casey’s rejected its final offer, which Van Aelst valued at approximately 8x EBITDA (earnings before interest, taxes, depreciation and amortization).
Couche-Tard Chairman Alain Bouchard has said Casey’s would be “a perfect fit” for its Midwest network.
“Given the current environment (i.e., much lower interest rates, Casey's EBITDA has doubled, etc.), we believe that Couche-Tard could be willing to pay a higher multiple, although nowhere near the 11x-12x … that JCP is arguing for,” Van Aelst said. “It is not unusual for activists to aim high.”