DES MOINES, Iowa -- Alimentation Couche-Tard Inc. plans to challenge the constitutionality of several Iowa anti-takeover laws as part of its hostile bid to purchase the Casey's General Stores chain of convenience stores.
Couche-Tard filed court papers late last week alleging that three Iowa statutes run contrary to U.S. law, according to a report in The Des Moines Register. Couche-Tard insists the laws create an unconstitutional barrier to its attempted purchase of Ankeny, Iowa-based Casey's, a publicly owned company with 1,513 stores in nine Midwestern states.[image-nocss]
Drake University law professor David Walker said the challenged laws sprang from a flurry of 1980s mergers and a U.S. Supreme Court decision that approved a similar law in Illinois.
Such laws "purport to allow the board [of directors] in dealing with an attempted takeover to take the interests of members of the community and employees into account and not limit the board's field of consideration to shareholders," Walker told the newspaper. "There are, as you might imagine, some economists and legal theorists, and some states, that think that's anathema."
Similar laws elsewhere have been found valid, lawyers say. But Iowa's versions of the laws have never been challenged in court. "There is no Iowa case authority that I'm aware of," Casey's attorney Ed Remsburg said.
Couche-Tard, making its claims in the company's first formal response to a June 11 lawsuit filed by Casey's, also seeks a court order banning Casey's leadership from implementing further takeover defenses, the report said. Couche-Tard has objected both to a "poison pill" approved by Casey's board members in April and to a series of recently changed employment contracts that could lead to fatter severance checks for 12 top Casey's executives if they were fired within two years of the company's changing hands.
Couche-Tard court papers contend the new agreements were completed "for the purpose of entrenching incumbent management and serving as a further obstacle to the proposed acquisition."
Documents filed this month with the U.S. Securities & Exchange Commission (SEC) say Casey's top five executives would split nearly $8.3 million in severance pay if there were a takeover, the newspaper reported. Combined, the top 12 executives own slightly more than 1 million shares of stock, worth roughly $37.5 million if the sale goes through.
Couche-Tard has offered Casey's stockholders $36 a share as part of a proposal scheduled to expire July 9. A possible September board fight also looms, as Couche-Tard works to elect its own slate of Casey's board members.
The challenged Iowa takeover laws place a three-year waiting period on most acquisitions by hostile suitors. The laws also allow company boards of directors to institute "poison pills" that inflate the cost for hostile buyers by giving shareholders access to cheap new stock. One provision also allows board members to place several "community interest factors" ahead of shareholder value in determining whether to accept an unwelcome bid.
"Collectively, these measures pose irreparable harm to Couche-Tard and all other Casey's shareholders by denying Couche-Tard the unique opportunity to acquire Casey's and by depriving Casey's shareholders of the opportunity to receive maximum value for their shares," Couche-Tard argues in the lawsuit, according to the newspaper. "Unless the court orders the relief requested, the substantial benefits of the proposed acquisition likely will be lost forever."
Casey's leaders insist Couche-Tard's offer vastly undervalues the company's earning potential. Casey's since last fall has refused to negotiate with Couche-Tard. On June 11, Casey's sued Couche-Tard for alleged securities violations connected to what the Ankeny, Iowa-based company called "a classic pump-and-dump scheme" tied to Couche-Tard's sale of 1.75 million shares of Casey's stock.
Laval, Quebec-based 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.
(Click here for previous CSP Daily News coverage.)
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