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LAVAL, Quebec, Canada -- Alimentation Couche-Tard Inc. yesterday mailed a letter to the shareholders of Casey's General Stores Inc. along with its definitive proxy materials in connection with the 2010 annual meeting of shareholders of Casey's to be held next month. Couche-Tard is soliciting votes to, among other things, elect its slate of candidates to the Casey's board of directors.
"We are confident our candidates for the Casey's Board will bring independent oversight and exercise independent judgment in considering our all-cash offer," said Alain Bouchard, president and CEO of Couche-Tard. "Without our offer, and especially given the impediments placed by Casey's in the path of any change of control transaction, we firmly believe that the shareholders of Casey's should expect that opportunities to realize a significant premium for their shares of common stock of Casey's will be non-existent in the near future."
In his letter, Bouchard urged Casey's shareholders to "send a clear and strong message" to the Casey's board by voting at the Sept. 23 shareholders' meeting for the slate of candidates nominated by the Canadian-based retailer. Also yesterday, Casey's filed an investor presentation with the SEC. The presentation presents data designed to demonstrate Casey's consistent out-performance, the positive impact of its recapitalization, and details of its decision to reject Couche-Tard's acquisition offer.
Among the points noted by Casey's to reject the Couche-Tard offer:
• The retailer has driven superior consistent superior shareholder returns, including an annualized return on investment of 13 percent from 2001 to 2010.
• Casey's stock has historically outperformed industry peers, including Couche-Tard, Susser and The Pantry, and the S&P 500 over the last three years.
• The recapitalization plan will provide significant returns going forward, with pro forma estimates calculating Casey's two-year compound annual growth in earnings per share being as high as 20 percent.
The full presentation can be found at www/supportcaseys.com. Last week, Casey's sent a letter to shareholders urging them to reelect the convenience store company's current board.
Meanwhile, four investor groups have launched separate class-action suits against Casey's and its board members. Each has accused Casey's directors of breaching their fiduciary duties to Casey's shareholders by refusing to negotiate with Couche-Tard
What follows is the full text of Bouchard's letter to Casey's shareholders:
"Alimentation Couche-Tard Inc. ("Couche-Tard") is North America's largest convenience store owner in terms of company-operated stores and has a network of 5,878 stores located in 43 States and in the District of Columbia and in all ten provinces of Canada. Couche-Tard operates such stores under its proprietary brands Circle K(R), Mac's(R) and Couche-Tard(R). Couche-Tard has offered to acquire all of the outstanding shares of common stock of Casey's General Stores, Inc. for $36.75 per share in cash. We are writing directly to you because, despite our repeated attempts to engage in a dialogue with Casey's, your Board of Directors (the "Casey's Board") has thus far refused to negotiate with Couche-Tard, not allowed us to conduct any due diligence and taken actions to impede our premium offer.
It is important that the shareholders of Casey's, as the real owners of the Company, decide for themselves the merits of Couche-Tard's all-cash premium offer without obstruction or obfuscation by the Casey's Board.
At the September 23, 2010 Annual Meeting of Shareholders of Casey's, you will have the opportunity to elect eight new, independent and qualified directors nominated by Couche-Tard who are committed to maximizing value for all shareholders of Casey's. We are confident our director nominees will bring independent oversight and accountability to the Casey's Board and exercise independent judgment in considering our all-cash premium offer.
Please vote TODAY by telephone, by Internet or by signing, dating and returning the enclosed BLUE proxy card in the postage-paid envelope provided.
COUCHE-TARD'S $36.75 PER SHARE CASH OFFER PROVIDES AN IMMEDIATE CASH
PREMIUM AND A HIGHLY ATTRACTIVE MULTIPLE FOR YOUR INVESTMENT IN CASEY'S
Our compelling $36.75 per share all-cash offer provides you with the opportunity to realize immediate cash premium value for your investment.
Consider the following:
- Couche-Tard's offer is higher than the all-time high of the common stock of Casey's prior to our announcement. Couche-Tard's all-cash offer represents a premium of:
- 26 percent over the one-year average closing share price of common stock of Casey's as of April 8, 2010;
- 20 percent over the 90-calendar day average closing share price of common stock of Casey's as of April 8, 2010;
- 16% over the closing price of common stock of Casey's on April 8, 2010, the last trading day prior to the public disclosure of Couche-Tard's offer; and
- 12% to the all-time and 52-week high trading price of common stock of Casey's trading prior to our announcement.
In stark contrast, the mean initial offer price for all-cash unsolicited offers since 1997, with a transaction value greater than $1 billion, is a 31 percent discount to the all-time high, and a 6 percent discount to the 52-week high, of the respective target companies' common stock trading prices.
- Couche-Tard's offer represents a multiple of 7.2x trailing EBITDA. At the time we first publicly disclosed our interest in Casey's in early April, shares of common stock of Casey's traded at 5.6x CY2011E EBITDA (based on IBES), which was the same as the average multiple of Casey's' peers, namely The Pantry, Inc., Alimentation Couche-Tard Inc. and Susser Holdings Corporation. Both the multiple we are offering and the adjusted multiple Casey's calculates are at the high end of prior transactions in the convenience store industry.
- Couche-Tard's offer is even more attractive considering the general decline in stock values. We believe our offer is even more attractive considering that stock values in general have fallen since we first publicly disclosed our offer as a result of, among other things, the weak economy and poor macroeconomic fundamentals. For instance, since April 8, 2010, the S&P 500 Index and S&P Retail Index(1) have declined 8 percent and 11 percent, respectively. We firmly believe that absent our offer, Casey's stock price would have traded in line with the declining trend.
- Couche-Tard is confident in its ability to finance this offer. Several prominent banks have already expressed a willingness to provide financing to Couche-Tard for the proposed acquisition. We believe the Casey's shareholders recognize that Couche-Tard is making this offer from a position of financial strength and that financing this transaction can be arranged quickly at the appropriate time.
THE RECENT LEVERAGED RECAPITALIZATION PLAN BY CASEY'S IS A DESPERATE
ATTEMPT TO DISTRACT SHAREHOLDERS FROM OUR ALL-CASH PREMIUM OFFER FOR THE ENTIRE COMPANY
On July 28, 2010, Casey's announced a $500 million leveraged recapitalization plan to repurchase approximately 25% of Casey's outstanding shares through a "modified Dutch auction" self-tender offer at a price of $38 to $40 per share of common stock. We believe this is a calculated move to financially engineer a temporary increase in Casey's stock price that fails to increase fundamental value for all Casey's shareholders.
Since our initial approach to Casey's in October 2009, Casey's has had more than ten months to consider a range of alternatives to maximize value for all Casey's shareholders, including identifying potential acquirers for the entire company. As we have long believed, and the announcement of Casey's leveraged recapitalization plan confirms, there are no third parties - financial sponsors or strategic partners - that are interested in acquiring Casey's, other than Couche-Tard. We believe that, without our offer and especially given the impediments placed by Casey's in the path of any change of control transaction, the shareholders of Casey's should expect that opportunities to realize a significant premium for their shares of common stock of Casey's will be non-existent in the near future.
THE COERCIVE FINANCING ARRANGEMENT FOR THE RECAPITALIZATION PLAN
TRANSFERS VALUE FROM SHAREHOLDERS TO NOTEHOLDERS AND IS DESIGNED TO ENTRENCH MANAGEMENT In addition to temporarily manipulating the price of common stock of Casey's, the leveraged recapitalization is a pretext for installing a coercive financing arrangement with a "poison put" mechanism created to impede any takeover attempt by any person. The private placement of notes recently completed by Casey's includes a costly and unusual "poison put" feature that favors the noteholders, not the shareholders. We believe the private placement of notes is designed to entrench the Casey's Board and the management of Casey's at the expense of the Casey's shareholders. Should the Casey's shareholders decide to replace the Board, this "poison put" feature associated with the notes requires Casey's to offer to pay the noteholders approximately $100 million in penalties based on treasury rates as of August 18, 2010. This unusual penalty is an attempt by management to take the decision regarding the future of Casey's away from the Casey's shareholders. The $100 million in penalties is also payable if Couche-Tard or any other party acquires 35% or more of the outstanding shares of Casey's.
The financing makes it almost $2 per share more expensive to acquire Casey's - that is $2 that could have gone to the Casey's shareholders but instead is designated for noteholders in the event of any such acquisition. Casey's change of control definition not only has a very low threshold but also a very high price attached to it. Typically, debt financing used by companies like Casey's has change of control premiums in the 1 percent to 3 percent range. In stark contrast, the Casey's Board and management are willing to give a 17 percent premium to the noteholders, which represents almost 5 percent of the company's current equity value (and almost 7 percent of the equity value pro forma for the self tender based on current stock prices) to the noteholders in a desperate attempt to keep their jobs at the expense of the Casey's shareholders. There are multiple forms of debt financing that feature change of control premiums far lower than the egregious 17 percent premium Casey's accepted.
COUCHE-TARD IS COMMITTED TO MAKING A COMBINATION WITH CASEY'S A REALITY
We have been prepared since the outset of this process to meet with the Casey's Board, management and advisors to discuss our all-cash premium offer, answer their questions and execute a mutually acceptable definitive merger agreement. Despite our best efforts, the Casey's Board and management team of Casey's continue to refuse to negotiate with Couche-Tard, have not allowed us to conduct any due diligence and have taken actions to impede our premium offer, including undertaking the leveraged recapitalization plan with expensive and unusual financing, commencing costly and meritless litigation against Couche-Tard, adopting a poison pill and putting in place lucrative golden parachute arrangements for Casey's executives. We have committed a significant amount of time and resources and taken the necessary steps to make a combination with Casey's a reality regardless of the impediments placed by Casey's in the path of the proposed transaction.
While it remains our desire to negotiate a mutually acceptable transaction with the Casey's Board, their refusal to engage in any dialogue with us has left us with no choice but to take our offer directly to Casey's shareholders, and to submit an alternate slate of director candidates to serve on the Casey's Board who we believe will better represent the interests of all Casey's shareholders.
The Casey's shareholders, the real owners of Casey's, now have the opportunity to send a strong message to the Casey's Board that it should stop wasting your money on unnecessary and expensive defensive measures and begin negotiating a mutually acceptable transaction with Couche-Tard so that all of you, as shareholders of Casey's, can realize full and immediate value for your shares.
COUCHE-TARD'S OFFER IS VERY ATTRACTIVE FOR ALL OF CASEY'S CONSTITUENCIES
We continue to firmly believe our offer is very attractive not only for the shareholders of Casey's but also for other constituencies of both Casey's and Couche-Tard. Couche-Tard's track record with employees of companies we have acquired is outstanding. Couche-Tard operates using a highly decentralized model, and we expect to keep most, if not all, of the employees of Casey's in place.
Additionally, we are confident the greater scale of a combined Couche-Tard and Casey's will provide the other constituencies of Casey's with opportunities beyond what the smaller platform of Casey's currently can provide. As we noted, Couche-Tard is the largest independent convenience store operator in North America (whether integrated with a petroleum company or not) in terms of number of company-operated stores.
Couche-Tard operates a network of 5,878 convenience stores, 4,146 of which include motor fuel dispensing, located in 11 large geographic markets, including eight in the United States covering 43 states and the District of Columbia and three in Canada covering all ten provinces.
Access to Couche-Tard's platform will provide the suppliers of Casey's with increased opportunities to expand their sales to convenience store chains within Couche-Tard's portfolio.
In the past, Couche-Tard has always been respectful to local businesses around the companies it acquired. Our decentralized model has enabled us to continue the relationships with existing suppliers and vendors. In the case of Casey's, we already have significant overlap in vendors and do not expect any material changes in operations.
VOTE FOR NEW, QUALIFIED AND INDEPENDENT DIRECTOR CANDIDATESON THE BLUE PROXY CARD TODAY
At the end of the day, you, as a shareholder, are the real owner of Casey's and you will ultimately determine the future of your investment, but we do not think you will have that opportunity without a change in the Casey's Board. We are confident that the eight independent nominees identified on the BLUE proxy card, upon election to the Casey's Board, will bring independent oversight and accountability to the Casey's Board.
We encourage you to send a clear and strong message to the Casey's Board that the Casey's shareholders want directors who will act in their best interests. Your vote is extremely important. To elect directors who are committed to looking out for your best interests, please vote TODAY by telephone, by Internet or by signing, dating and returning the enclosed BLUE proxy card in the postage-paid envelope provided.
We thank you for your support.
President and Chief Executive Officer