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ANKENY, Iowa -- Casey's General Stores Inc. received a preliminary proposal for a consensual transaction at $40 per share in cash, from an unnamed, strategic third party. This challenges a hostile $38.50-per-share tender-offer by Canadian c-store firm Alimentation Couche-Tard, and comes at the heels of Casey's own $500 million recapitalization plan, priced between $38-$40 per share.
While the board of Casey's believes the company's value is higher than the new offer, it authorized discussions with the third party to explore whether a transaction can be reached that reflects the value of Casey's.
In a letter to Casey's shareholders released yesterday, company President and CEO Robert Myers wrote: "The board reviewed the proposal and unanimously determined that it substantially undervalues Casey's. While the board firmly believes that Casey's value substantially exceeds $40 per share, it has authorized discussions with the third party to explore whether a transaction can be reached that reflects the true value of Casey's and is in the best interests of Casey's, its shareholders and other constituencies."
Myers noted there can be no assurances that a transaction will be reached, and the company is under no obligation to provide an update on the discussions with the third party.
Meanwhile, the company's board of directors notified shareholders it unanimously recommended against Couche-Tard Inc.'s revised tender offer issued Sept. 1, to acquire Casey's for $38.50 per share, as it substantially undervalues Casey's and is not in the best interests of the company, its shareholders and other constituencies.
In the letter to shareholders, Myers stated both of the proposals undervalue Casey's, as:
• Casey's value proposition dramatically increased since Couche-Tard launched its hostile offer in April through the execution of its strategic initiatives and successful recapitalization.
• Analysts see Casey's intrinsic value at $45 per share, without reflecting a takeover premium.
• Casey's continues to deliver strong financial and operational results including increasing its total stores and dividend.
• Casey's significant value is not reflected in Couche-Tard's offer or the third party proposal.
Myers also detailed the performance of its recently completed recapitalization plan as evidence of Casey's value. The plan allowed Casey's to acquire approximately 26 percent of the company's outstanding shares for $38 per share. Myers wrote to shareholders: "We continue to believe that Casey's shares are substantially undervalued at all prices in our $38 to $40 self-tender price range. Our long-term shareholders appear to agree with us as evidenced by the fact that a majority of our post-recapitalization shares were not tendered into our self-tender offer even at $40 per share (52 percent of the approximately 37.8 million shares remaining after the recapitalization did not tender at any point in the range)."
Myers also noted the recapitalization plan has allowed the company to make progress on its strategic initiatives, including signing commitments to acquire 52 stores by the end of this calendar year.
In related news, Couche-Tard responded to the news of a third-party proposal, questioning the timing of the announcement and alleging it was made to inflate the company's share price.
"We are pleased that Casey's is now in 'Revlon' mode given that the Casey's board of directors has finally made the decision to put the company up for sale. Couche-Tard looks forward to participating in Casey's auction process," Couche-Tard said in a statement. "We are, however, surprised and suspicious of the timing of the announcement by Casey's given that it comes only two weeks before the annual meeting of shareholders of Casey's, and only days after the completion of its self-tender. We believe this is another maneuver orchestrated by the Casey's board to artificially inflate its stock price leading up to the shareholder vote."
Couche-Tard also asked Casey's shareholders to ask themselves why the company would "authorize discussions with a third party regarding only a preliminary, non-binding indication of interest after it has repeatedly refused to meet with or negotiate with Couche-Tard over an extended period of time regarding Couche-Tard's firm, all-cash, fully financed premium offer to acquire all of the outstanding shares of Casey's."
The statement concluded: "Given the recent actions by the Casey's board … we strongly believe that Casey's shareholders deserve to be represented by independent directors who will act in the best interests of all Casey's shareholders and conduct a fair auction of Casey's. Couche-Tard's independent director nominees, if elected to the Casey's board, are committed to fully considering any and all bona fide offers to acquire Casey's, including Couche-Tard's offer and any other premium proposal to acquire Casey's."
Couche-Tard also sent a letter and proxy cards to shareholders of Casey's General yesterday, urging shareholders to vote to elect its eight new, independent nominees to the Casey's board during its 2010 annual meeting to be held on Sept. 23, 2010.
"We strongly believe that Couche-Tard's all-cash, fully financed premium offer is the most attractive strategic alternative available to shareholders of Casey's, and delivers immediate cash value superior to what Casey's can deliver continuing as a standalone company," Alain Bouchard, Couche-Tard president and CEO, wrote in the letter to Casey's shareholders.