This past week, Casey's General Stores agreed to buy back 25% of its outstanding shares for $38 per share; however, the offer led shareholders to tender nearly half the company's stock, a result that clearly showed Couche-Tard what price investors consider fair. Thus, Couche-Tard countered yesterdayas reported in a Morgan Keegan/[image-nocss] CSP Daily News Flashby boosting its tender offer from $36.75 to $38.50 per share.
"In raising our offer, we have taken into account the views of the Casey's shareholders and our goal of completing a transaction that makes compelling strategic sense for both companies," Couche-Tard president and CEO Alain Bouchard stated yesterday. "In Casey's self-tender offer, the shareholders of Casey's made clear their views on the value of Casey's. The fact that a majority of the then-outstanding shares of Casey's were tendered at $38 per share demonstrates that our revised offer to acquire 100% of the outstanding shares of Casey's for $38.50 per share in cash is compelling."
The revised offer implies a total enterprise value of approximately $2.0 billion on a fully diluted basis, including net debt of Casey's of approximately $528 million, according to Couche-Tard.
"We believe that our revised offer is the most attractive strategic alternative available to the Casey's shareholders and delivers immediate cash value superior to what Casey's can deliver continuing as a standalone company," Bouchard said. "We remain ready, willing and able to complete a transaction with Casey's expeditiously and urge the Casey's board of directors to begin discussions with Couche-Tard immediately to maximize value for the Casey's shareholders and make this combination a reality."
According to Couche-Tard, its increased, all-cash offer represents a 32% premium over the one-year average closing share price of Casey's as of April 8, 2010 (the last trading day prior to the public disclosure of Couche-Tard's proposal), a 26% premium over the 90-calendar-day average closing share price of Casey's as of April 8, 2010, and a 22% premium over the closing price of $31.59 per share of Casey's on April 8, 2010. Couche-Tard's increased offer also represents a 17% premium to the all-time and 52-week high trading price of common stock of Casey's prior to April 8, 2010.
Couch-Tard's announcement caused Casey's stock price to jump more than $1 per share yesterday, and it was trading at $38.57 per share late yesterday afternoon.
Casey's General Stores reacted in similar fashion yesterday as it did after the initial Couche-Tard bid of $36 per share was announced and when an increase to $36.75. It is urging shareholders "not to take any action regarding the revised tender offer" until its Board of Directors can review the new bid. In each of the previous offers, the board strongly recommended against accepting the tender.
Meanwhile, Couche-Tard also announced that it entered into a credit agreement with a consortium of Canadian and international financial institutions in which the institutions have agreed to provide up to $1.5 billion in funds pursuant to a four-year unsecured term loan facility. The term loan facility, together with Couche-Tard's existing credit facilities and cash on hand, will be used to finance Couche-Tard's tender offer to acquire all of the outstanding shares of common stock of Casey's.
"As we have said all along, Couche-Tard is making its offer from a position of financial strength," said Bouchard. "Our new financing agreement underscores the seriousness of our offer and our deep commitment to making a combination with Casey's a reality."
For his part, Couche-Tard stock analyst Martin Landry of Desjardin Securities said Couche-Tard's increased offer should ultimately have a positive effect on that company's stock.
"Assuming a purchase price of $2.1 billionand without assuming any synergies, we estimate that the transaction would be accretive to Couche-Tard's EPS (earnings per share) by approximately 42 cents based on fiscal year 2011 numbers," Landry wrote in a research note yesterday. "We expect that synergies of up to $60 million could be realized in subsequent years following the completion of the transaction. Including these synergies, the potential acquisition could add $5 to our target [stock] price."
Based on consensus estimates, according to Landry, the revised purchase price of $2.1 billion implies a transaction multiple of 6.5x fiscal year 2011 estimated value/EBITDA and a 15x multiple based on FY11 EPS, assuming interest expense of $18 million after tax for Casey's new financing. "We find these valuation multiples acceptable given the quality of the asset to be acquired and the potential for future synergies," he wrote.
Laval, Quebec-based Couche-Tard operates a network of 5,878 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.
Casey's General Stores, based in Ankeny, Iowa, has 1,531 corporate stores in nine states.
(Click here for previous CSP Daily News coverage of the Casey's/Couche-Tard saga.)
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