ANALYSIS, Part 1: Casey's Goes It Alone

Midwest chain rebuffs 7-Eleven just weeks after turning aside Couche-Tard

Published in CSP Daily News

By
Mitch Morrison, Vice President & Group Editor

ANKENY, Iowa -- Not even a ramped-up offer and potential financial windfall were enough to sway Casey's General Stores Inc. to forgo its fiercely fought for independence. Some six weeks after shareholders emphatically rebuffed a hostile takeover bid by Alimentation Couche-Tard Inc., Casey's board of directors said Wednesday it has ended talks with the other suitor, 7-Eleven Inc.

The ending to a yearlong convenience store soap opera comes after 7-Eleven, the nation's largest c-store chain that has in recent years launched an ambitious expansion program, reportedly upped its [image-nocss] offer from $40 per share to $43, or more than $2 billion, for the Ankeny, Iowa-based company.

But unlike Casey's tension-filled September shareholder meeting that featured a competing slate of board of director candidates from Couche-Tard, 7-Eleven's interest in the Midwestern giant lacked the rancor or executive verbal lashings that played out between Casey's CEO Bob Myers and Couche-Tard's top executive Alain Bouchard.

In fact, 7-Eleven had, until yesterday, remained ominously quiet since Casey's revealed shortly before the shareholders' meeting that it had entered into preliminary talks with the Dallas-based retail giant.

"To me," one analyst told CSP Daily News, "the end of the story was not today's announcement but when 7-Eleven showed up, because at that point, [Casey's] investors might have had high expectations of a bidding war. I knew that Couche-Tard wouldn't get into that."

"From the very beginning," the analyst continued, speaking only on condition of anonymity, "I didn't think 7-Eleven was interested in buying Casey's. It's not their business model. They're about franchisees and urban stores. That's not Casey's."

Playing on that theme, another analyst questioned what many considered a rather casual ending to an acclaimed bid for Casey's nearly 1,600-store empire. "If I were a Casey's stockholder who supported their slate because of 7-Eleven, I'd be upset," he said. "Casey's board puts out a press release in September saying they're in talks with 7-Eleven and they then get [re-elected]. And now they're saying the talks are over. I bet you well north of 50% of Casey's shareholders would have taken the $43."

In a filing Wednesday, as reported in a Morgan Keegan/CSP Daily News Flash yesterday, Casey's said it received a proposal from 7-Eleven of $43 per common share, but that its board of directors, in consultation with financial advisors Goldman Sachs, "unanimously determined that the revised proposal does not reflect the value of Casey's and its significant growth opportunities, and is not in the best interests of Casey's, its shareholders and other constituencies."

The company added, "Given that Casey's and 7-Eleven have been unable to reach mutually agreeable terms, the companies are no longer in discussions."

Confirming cessation of talks, 7-Eleven president and CEO Joe DePinto said, "While we are no longer in talks with Casey's regarding a transaction, our strategy is to grow aggressively in the U.S. and Canada. We will continue to pursue transactions that make sense for our company to maximize shareholder value."

Was the 7-Eleven bid a mere roadblock to keep Couche-Tard from making an acquisition that would have given it bragging rights as the largest c-store chain in North America? Or was 7-Eleven perhaps a glorified pawn recruited by Casey's to block another's bid? (Watch for answers to these questions in tomorrow's CSP Daily News.)

Casey's currently has more than 1,530 stores in nine Midwestern states, primarily Iowa, Missouri and Illinois (see related story in this issue).

7-Eleven said that it expects to add more than 300 stores in 2010 throughout the United States and Canada. The company operates, franchises or licenses more than 8,200 stores in North America.( Click here for previous CSP Daily News coverage of Casey's and Couche-Tard.)

By Mitch Morrison, Vice President & Group Editor
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