Fight to the Finish

Historic takeover battle for Casey's rages on.

Mitch Morrison, Vice President of Retailer Relations

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Nearly 12 months have passed since Canadian pass rusher Alimentation Couche-Tard called its first blitz on Casey’s General Store, seeking to tackle the Midwestern juggernaut, only to be met with equal resistance.

Tug of war, fist meets palm, eyeball eyeing eyeball: Come up with your pet metaphor and you have the biggest confrontation to hit the convenience channel in recent memory.

We’re not talking about acquisitions, not even of the biggest sort, as when Couche-Tard cemented its American presence by plucking the 2,200-store Circle K chain from ConocoPhillips.

That was between willing partners. This is a hostile takeover.

“This is an anomaly,” says a veteran Midwestern operator. Like most of the dozen retailers, industry analysts and financial experts interviewed for this story, this operator agreed to speak openly only on condition of anonymity.

“There is a lot of history with Casey’s. But this does show the dangers of going from a closely held company to a public  company. You get the large institutional investors buying large numbers of shares. You suddenly lose control of your own company. That’s what Casey’s is struggling with right now.”

For the nearly 5,900-unit Couche- Tard, Casey’s represents the latest in a decade-long push to grow through acquisitions, first in Canada and, over much of the past decade, in the United States. If successful, the company becomes the largest c-store operator in North America.

For Casey’s, it’s a story of self-preservation and values, of continuing to service prairie outposts along the rows of cornfields and long-distance bike routes away from the urban bustle. In a sense, it’s Big City vs. Small Town. And the outcome remains untold.

Indeed, just days before CSP went to press, 7-Eleven, the country’s largest convenience chain, had jumped to the fore, forcing Couche-Tard to recalibrate its strategy. (See 7-Eleven sidebar on p. 84.) On Sept. 23 Casey’s shareholders were to vote on the future of the company, contemplating three viable options: to remain independent, to enter into exclusive negotiations with either Couche-Tard or 7-Eleven, or to open the door to additional suitors.

This story, however, delves into the culture and business thinking behind Couche-Tard’s dramatic yearlong hostile takeover bid of the country’s largest Midwestern chain, Casey’s.


Early Friday morning, April 9, news flashes blanketed e-mail inboxes. Couche-Tard let the world know it was offering $36 per share, or $1.9 billion for the 1,531-store operator.

Shares in Casey’s jumped nearly 24%. The deal rattled the proverbial saber, and an industry suddenly sharpened its focus on the channel’s deal of the century.

“We have an extremely high regard for your operations, management and talented employees,” Alain Bouchard, Couche-Tard’s chief executive, wrote to Casey’s board of directors.

Suggesting that the Midwestern chain is undervalued, Bouchard continued, “Our operations are highly decentralized and we have a track record of keeping most of the existing management and employees in place as we did in the Circle K acquisition and our other transactions.”

The letter was made public and came six months after Couche-Tard had tendered a similar offer, but in private. To Casey’s board, Bouchard wrote: “Despite our repeated efforts starting in October 2009 to engage in negotiations, and without the benefit of discussing our proposal with us or our advisors, your board of directors unanimously rejected our proposal. Our goal remains to work with you to agree to a negotiated transaction.

“However, due to your unwillingness to engage in discussions and the unique opportunity presented by our proposal for your shareholders to realize full and immediate value, we are compelled to make this proposal known to your shareholders.”

Before the shock could settle, Casey’s rejected the offer with disdain. “Couche- Tard is trying to acquire U.S. companies on the cheap,” Casey’s president and CEO Robert Myers told shareholders.

The offer reflects a 7.4x EBITDA multiple with an average $1.3 millionper- store price. On the surface the tender seemed fair, one Bouchard proclaimed “presents an exciting opportunity to create significant value for our respective shareholders, employees, business partners and other constituencies.”

But Myers rejoined that Casey’s is growing, is itself making acquisitions, expanding into new turf and upgrading the quality of its portfolio.

It’s a cat-and-mouse play that began publicly in the spring, drifted into summer and now lazes into fall.


From Sioux City, S.D., Stewart, a cross-county biker, pedals his 21- speed with urgency. A native New Yorker, he shares a mid-July post from a journal he is keeping about a trek that begins in Manhattan and will conclude in Oregon.

“Towns between 500 and 2,000 people will generally have only one store selling food, almost always a Casey’s General Store, which also sells gas. … There are very few mom-and-pop businesses in small-town America that I have seen. What is out here is Casey’s.”

Whether to an insider or a Facebook friend, Casey’s is unmistakable. It is the crop of the c-store heartland. For many in the upper Midwest, it is their daily jaunt, their unmistakable friend. It is their coffee and store-made-doughnut stop for breakfast. It is their pizzeria in the afternoon and evening.

“They’re one of the biggest pizza purveyors in the area they serve,” says a longtime c-store observer familiar with the company. “In a lot of the towns, Casey’s is the only place where you can get pizza. So it’s not just a c-store.”

Should Couche-Tard reap Casey’s bounty, one wonders about not only the effect of losing a homegrown brand (and possibly several local vendors) but also about how the Quebec company—with stores across much of the American landscape and with semi-autonomous units to govern them—will adapt to the ubiquity of small-town America.

Based on Couche-Tard’s success with integrating complex chains, from Dairy Mart to Circle K, as well as modest and moderate-sized stalwarts such as Bigfoot, there is little doubt from a technical view that the company would succeed in right-fitting Casey’s into its portfolio of what would be nearly 7,500 sites across North America.

Operationally, Couche-Tard runs a different kind of store than Casey’s, and experts suspect that here, too, Couche-Tard would likely find the right mix of local favorites, its own private- label successes and classic c-store fare to make the stores work.

What is questioned is culture. Can Couche-Tard create a persona that binds the Casey’s core consumer? Can it deliver on the emotional appeal that Casey’s routinely fields on Facebook and other sites? Take a summertime Casey’s promotion on its Facebook page and website: “This week’s word of the week is SWIMMING! Now that you have the word of the week, you can go to and enter to win free gas for a year!”

Joe H., a loyal customer, chimes in: “Free gas for a year would be sweet.”

And when the company wishes its Facebook friends a happy Independence Weekend, Tina M. types in, “Please be kind ordering pizzas from Bob at the Manning store. Better yet, make sure to leave him a Pepsi!!! Love you Dad!!”

Or, as one recent East Coast visitor observed during a stop at a Casey’s store: “They were offering free pony rides. I’ve never seen that at a c-store but for Casey’s, it must work.”

Indeed, for those operating on busy thoroughfares, robust suburbs and bustling urban markets, Casey’s core store may come as somewhat of a throwback. Its designs are generally milquetoast, forecourts frequently fielding no more than four fueling dispensers, and much of its offer seems anachronistic, with groceries, motor fuels and general merchandise such as razor blades stocking some of the aisles. The chain did not have scanning in all stores until only a few years ago.

And yet, the company in June reported a record performance for fiscal year 2010, which ended April 30. Grocery and other merchandise increased more than 6% to $1.1 billion. And the strength of the company’s in-store offer—fountain and made-on-site foodservice—grew at a steady 4.2% at same stores, with a healthy margin of nearly 64%.

Based on pretax earnings of more than $181 million, Casey’s averaged $121,000 in per-store pretax profit (based on approximately 1,500 stores), compared to $89,000 per store for Alimentation Couche-Tard. (Couche- Tard’s figures are deflated because nearly 60% of its Canadian stores do not sell fuel. A look at corporate revenues shows Couche-Tard with higher per-store figures of $3.7 million in North America vs. $3.1 million for Casey’s.)

“Casey’s stores may not overall be as modern or sophisticated as others, but they know their customers well and they make great margins on their foodservice,” says one analyst familiar with the company.


Such sentiment aside, a number of industry experts interviewed for this story say Couche-Tard would bring an aggressiveness and growth mentality to a company whose annual projections, until recently, had been anchored in consistency and stability.

Or, as one observer suggested, “If Casey’s and Couche-Tard were baseball teams, Casey’s would be the Minnesota Twins, happy with solid returns; and Couche-Tard would be the New York Yankees, not satisfied with anything but winning the World Series.”

When asked about the companies’ respective operational models, another industry expert said, “Couche-Tard might take an MBA execution approach. Casey’s is more meat and potatoes.”

Veteran c-store consultant Dick Meyer is intrigued by this battle of the c-store titans. “These are two honorable men,” he says of Couche-Tard’s Bouchard and Myers of Casey’s. “I do think what’s going on is very unique to our channel. You don’t see hostile takeovers, and you have two very different cultures.

“Casey’s has never been known for its flair, not does it have to,” says Meyer. “They know their communities, they know their people. In many pockets you would be hard-pressed to find someone who doesn’t have a family member or a friend who has worked at Casey’s. There’s a lot of history.

“Couche-Tard is different. They’re one of very few who could even consider making a bid on Casey’s, and their model is much more centered on hitting certain returns.”

Asked whether he believes a deal will be consummated, Meyer, like others interviewed, is cautious and calls it 50- 50. But if Couche-Tard is successful, Meyer, who has journeyed over the years through much of Casey’s terrain, offers the following advice: “If I were a shareholder for Couche- Tard, I would be disappointed if they changed the name from Casey’s to Circle K. … Why would Couche-Tard forfeit that brand equity? It’s very powerful.”

Meyer suggests that Couche-Tard could use Casey’s as a platform “brand” to grow in the upper Midwest. “Couche-Tard can do a logical consolidation of other chains in a part of the country that has low employee turnover and unusually consistent customer loyalty,” he says.

“When you start with those unique features and employ Couche-Tard’s professional aggressiveness, the opportunity exists that a Casey’s-Couche-Tard combination could double the number of stores in the Midwest. It’s an area that’s highly fragmented and where there are not many other major competitors that are likely to attain the same result.”

Indeed, one of the inherent benefits Casey’s enjoys is that its markets largely—though not exclusively— bypass the possibility of battles with well-heeled operators Kwik Trip, Holiday Stationstores and Kum & Go.

Like a missionary finding converts off the beaten path, Casey’s has built a 51-year record of successfully opening stores where most won’t venture.


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