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DES MOINES -- Alimentation Couche-Tard is challenging the constitutionality of several Iowa laws as it attempts to purchase Casey's General Stores.
The Quebec-based chain of nearly 5,900 convenience stores in the United States and Canada, filed court papers arguing three Iowa anti-takeover laws are contrary to U.S. law. Couche-Tard claims the laws create an unconstitutional barrier to its hostile bid of Casey's, the publicly owned company of more than 1,500 stores in nine states, according to a report by the Des Moines Register.
The laws sprang from a flurry of 1980s mergers and a U.S. Supreme Court decision that approved a similar law in Illinois, David Walker, Drake University law professor, told the newspaper. Such laws "purport to allow the board 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 said. "There are, as you might imagine, some economists and legal theorists, and some states, that think that's anathema."
Iowa's laws apply only to publicly traded companies that are incorporated here.
Similar laws elsewhere have been found valid, the newspaper reported. However, Iowa's laws have never been challenged in court. "There is no Iowa case authority that I'm aware of," Casey's attorney Ed Remsburg told the newspaper.
Couche-Tard also seeks a court order banning Casey's leadership from implementing further takeover defenses. The Canadian operator objects to a "poison pill" approved by Casey's board members and to recent changes to contracts that could lead to larger severance checks for 12 Casey's executives if they are fired within two years of the company changing hands, according to the Register.
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 with the U.S. Securities and Exchange Commission reveal Casey's top five executives would split nearly $8.3 million in severance if a takeover happened. The top 12 executives own slightly more than 1 million shares of stock worth roughly $37.5 million if the sale goes through, the newspaper reported.
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 looms, as Couche-Tard works to elect its own slate of Casey's board members.
Iowa law calls for a three-year waiting period on most acquisitions by hostile suitors. The laws 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 allows board members to place several "community interest factors" ahead of shareholder value when determining whether to accept an unwelcome bid, the newspaper reported.
"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 argued.
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