Couche-Tard Done With Casey's?

Published in CSP Daily News

Canadian retail giant not expected to renew bid for Iowa chain after 7-Eleven walks away

LAVAL, Quebec -- Alimentation Couche-Tard Inc. is not expected to rekindle its interest in Casey's General Stores Inc. now that the Iowa convenience store chain has broken off talks with 7-Eleven Inc., according to the Canadian Press, citing analysts who have been following the saga.

Ankeny, Iowa-based Casey's said Wednesday that it had spurned an increased offer by 7-Eleven and that takeover talks with the world's largest convenience store chain had ended. Amid weeks of negotiations, 7-Eleven increased its cash offer by $3 per share to $43. That compared with $38.50 that [image-nocss] had been offered by Couche-Tard. (See story in this issue of CSP Daily News.)

But Casey's board of directors "unanimously determined that the revised proposal does not reflect the value of Casey's and its significant growth opportunities," Casey's said in a news release.

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

Japanese-owned, Dallas-based 7-Eleven's decision to end its quiet pursuit of Casey's was expected by some who thought Casey's preferred to remain on its own, said the report.

While 7-Eleven has the financial wherewithal to buy Casey's, the two companies have pursued different strategies. 7-Eleven has focused primarily on urban, franchised stores with fewer that offer gasoline, while Casey's is mainly rural, with gasoline, and all 1,533 of its stores are corporate owned.

"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," 7-Eleven CEO Joe DePinto said in a news release.

The company 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.

Ben Brownlow, a Casey's analyst with Morgan, Keegan & Co., said that he was not surprised by Casey's rejection of the bid and does not believe that Laval, Quebec-based Couche-Tard will stray from its disciplined acquisition strategy and top 7-Eleven's failed bid.

"The [Casey's] board and a majority of shareholders believe that the shares are worth north of $43, and I wouldn't expect Couche-Tard to pay that high a price," he told the news agency.

In fact, he believes the cost of 7-Eleven's offer was $45 per share when considering $100 million in penalties associated with Casey's recapitalization. That's about the 12-month share price target of analysts.

Couche-Tard did not return phone calls from the news agencyseeking comment.

Irene Nattel of Desjardins Securities said Casey's rejection of $43 sends "a clear message to other potential parties interested in bidding on Casey's that the board is unlikely to support any price below mid-$40s."

"At this point, it looks as though Casey's will remain an independent, publicly traded company--which is fine from our perspective," she wrote in a report, cited by CP.

Nattel said Casey's remains the "blue chip" among c-store operators with robust gasoline and foodservice margins despite a sluggish economy. It announced Wednesday the purchase of up to 44 stores in three Midwest states, marking a 4% increase in its network size in the past month.

She had previously speculated that Couche-Tard could eventually mount a new challenge for Casey's once 7-Eleven walked away.

Canada's largest c-store chain threw in the towel September 30 following a bruising six-month battle to acquire Casey's for $2 billion.

Couche-Tard walked away after Casey's board refused to enter into negotiations about its offer and Casey's shareholders rejected its slate of directors and efforts to change poison-pill bylaws.

( Click here for previous CSP Daily News coverage of the Casey's, Couche-Tard and 7-Eleven triangle.)