Following Alimentation Couche-Tard's unsolicited bid this past week to purchase the 1,500-store company for $36 per share (about $1.9 billion), analysts are now weighing in on just how much it might cost to force a sale and who else might have both an interest and the financial wherewithal to make it happen.
"We do not expect another bidder to [image-nocss] make an offer for Casey's given that the other large strategic players, such as The Pantry and Susser Holdings, are already highly leveraged," wrote Martin Landry of Desjardins Securities in a research report.
He further noted that the only private-equity player in the convenience-store industry is Sun Capital Partners Inc., but with only 400 stores under the Village Pantry and Worsley banners, a bid at Casey's would be a major undertaking.
James Durran, an analyst with National Bank Financial, largely agreed. He told Canada's The Globe and Mail there are few alternatives to Couche-Tard purchasing Casey's, again noting Sun Capital Partners, but also including 7-Eleven Inc., based primarily on its size and scale.
Analyst Michael Van Aelst of TD Newcrest is less convinced.
"With Big Oil exiting the industry, 7-Eleven shifting its focus to a franchise structure and other larger players either over-leveraged or struggling, it is hard to imagine another strategic bidder emerging," he wrote in a research note this week. "Moreover, given that this is already a well-managed company (not a turnaround story), we fail to see how private equity could generate appropriate returns and exit at higher valuations if it were to outbid the most logical strategic buyer [Couche-Tard]."
Added Brent Rystrom, analyst with Feltl & Co. in Minneapolis, "We believe it is likely Casey's could find a private-equity buyer in this range, implying [Couche-Tard] might have to make an offer in excess of $41 to actually close a deal," he told the Financial Post.
It's that dollar amount that will likely make the difference in both who ultimately might buy Casey's and whether the chain will be purchased at all.
On Thursday, a day before the Couche-Tard bid was made public, Casey's stock closed at $31.59. In the previous 52 weeks, the stock price had varied from a high of $32.08 to a low of $24.31 per share. Since the offer became public, the Iowa-based c-store retailer's shares jumped more than 23% to $39, where it stood yesterday afternoon, essentially setting a price investors are willing to pay and, presumably, willing to accept to sell their shares.
So how much might Couche-Tard or another bidder have to offer to get the deal done?
Durran: As much as $41 a share.
Landry: Conservatively, $39.
Van Aelst: At least $40.
Rystrom: $38.50 to $41
For its part, executives at Casey's continue to maintain that Couche-Tard's initial offer "significantly undervalues Casey's and is not in the best interests of the corporation."
Thus, the mindset in Ankeny, Iowa, is full steam ahead on the previously set course of business, according to senior vice president and CFO Bill Walljasper.
"Their offer didn't really affect our strategy," he told CSP Daily News. "We have a proven track record of delivering value to our shareholders. We think our continued strategic initiatives will continue to provide value above their proposal."
The news of Couch-Tard's bid for Casey's even caught the attention of CNBC investment guru Jim Cramer. Click on the video above to see his "Mad Money" segment on the two companies, as well as how the bid, whether or not it is successful, could affect the rest of the industry. (Also see related story in this issue of CSP Daily News.)
Click hereto see what others are saying about the takeover bid.
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