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LAVAL, Quebec -- Alimentation Couche-Tard Inc. made a tender offer directly to shareholders yesterday morning to acquire all the outstanding shares of common stock of Casey's General Stores Inc. at $36 per share, in hopes that the offer will move Casey's board of directors to open up negotiations for a friendly merger of the two convenience store companies, Couche-Tard executives told CSNews Online.
"We hope to see Casey's management accept our offer," Raymond Pare, CFO of Couche-Tard, told CSNews Online in an interview. "We encourage shareholders to take steps to work with Casey's to bring them to the table."
The cash offer -- totaling $1.9 billion -- was sent directly to Casey's shareholders yesterday morning. Couche-Tard executives noted this offer represents the full value of Casey's.
"This is what we are willing to pay, and we're strong buyers at $36 per share," Pare said. "It is full value at this price."
The combination of the c-store chains of Casey's General Stores and Couche-Tard would be beneficial for all parties involved, Couche-Tard shareholders told CSNews Online.
"This transaction would form a stronger, more competitive player in the market areas, and be good for shareholders of both companies," said Pare, noting there are only 28 Couche-Tard locations within a mile of Casey's stores. He added: "We have a great respect for Casey's operations and management."
View a map of Couche-Tard and Casey's market overlap provided by TDLinx.
Alain Bouchard, Couche-Tard president and CEO, added: "It's part of our plan to buy more stores, and Casey's is a perfect fit with our geography. We like their foodservice model for their rural stores, and we can add value to their stores and learn from their expertise on foodservice."
In an investor presentation obtained by CSNews Online, Couche-Tard also detailed other benefits of the proposed merger, including:
-- Creates largest independent corporate-store operator in North America with approximately 7,400 locations;
-- Enhances scale and efficiency;
-- Positions Couche-Tard to generate more cash flow;
-- Delivers immediate premium to Casey's shareholders; and,
-- Casey's stakeholders become part of bigger organization with benefits of a decentralized business model empowering its employees.
The presentation also detailed Couche-Tard's integration strategy, including the impact on stores, should the merger come to fruition. Couche-Tard's decentralized business model will allow Casey's to be run as a stand-alone business unit, the company stated, adding the Casey's store banner will remain in place with no rebranding or remodels required. Couche-Tard would continue to grow the chain as a rural store format in the
U.S. Midwest region, and would possibly leverage Casey's wholesale and distribution capabilities, while potentially implementing the best practices from both convenience store chains in their respective counterparts. Couche-Tard's presentation to investors also noted no significant capital expenditures would be required to integrate Casey's.
Couche-Tard made public its intentions to acquire Casey's General early last month, when it disclosed a letter to Casey's President and CEO Robert J. Myers, dated April 9, which said the Laval, Quebec-based company was "compelled to make this proposal known to your shareholders," as Casey's was unwilling to engage in negotiations.
In a response letter, Myers wrote to Bouchard, saying he was "very disappointed that you have decided to launch a hostile public campaign," and called the offer "significantly undervalued" and "not in the best interests of the corporation."
The all-cash offer to shareholders represents a 14 percent premium over the closing price as of April 8, 2010, the last trading day prior to the public disclosure of Couche-Tard's proposal. The offer also implies a previous 12 months (as of Jan. 31, 2010) EBITDA multiple of 7.4 times and a price of $1.3 million per store. Couche-Tard noted the offer compares favorably to corresponding metrics of publicly traded companies and precedent transactions in the c-store industry. In the presentation to investors, Couche-Tard referenced the multiples of several other previous c-store industry transactions, which averaged 6.3 times EBITDA. It also detailed some of its past acquisitions and multiples.
View the charts of precedent c-store transactions.
View the chart of Couche-Tard's previous transactions.
As part of the offer, Couche-Tard hopes to see a poison pill previously adopted by Casey's General's board of directors dropped from Casey's shareholders' rights agreement. The plan will go into effect if any one shareholder obtains 15 percent of the company, and once triggered, would give all Casey's shareholders except the "acquiring person" the right to purchase new stock at one-half the market price.
"We hope to remove this pill," said Pare. "We don't view the pill as being shareholder friendly."
Meanwhile, Casey's General issued a statement yesterday asking shareholders to abstain from taking any action regarding Couche-Tard's proposal. The board of directors for the Midwestern retailer will review the offer with its financial and legal advisors, and make a recommendation to shareholders within 10 business days, consistent with its fiduciary duties. Casey's representatives declined to comment beyond the statement when contacted by CSNews Online.
As reported yesterday in a CSNews Online Breaking News Alert, if Casey's board remains unwilling to negotiate and enter into a merger agreement with Couche-Tard, the Canadian company intends to nominate and solicit proxies for the election of nine independent directors to Casey's board at its 2010 annual meeting of shareholders.
In response to this, Casey's also noted in the statement: "If and when Couche-Tard nominates directors, the board will evaluate the submission and candidates consistent with the company's bylaws."
The offer to shareholders is scheduled to expire at midnight EST, Friday, July 9, 2010, unless extended.
Goldman, Sachs & Co. is acting as financial advisor to Casey's, and Cravath, Swaine & Moore LLP and Ahlers & Cooney, PC are providing legal advice.
Credit Suisse Securities (USA) LLC is acting as financial advisor to Couche-Tard and dealer manager for Couche-Tard's offer, and Dewey & LeBoeuf LLP is acting as legal counsel. Innisfree M&A Incorporated is acting as information agent for Couche-Tard's offer.
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