Alimentation Couche-Tard Inc. has increased its offer for Casey’s General Stores Inc. to $36.75 per share in an effort to persuade shareholders to back its takeover. The revised transaction has a total enterprise value of approximately $1.9 billion on a fully diluted basis, including net debt of Casey’s of approximately $28 million.
Couche-Tard’s original offer was $36, which was made public April 9 after Casey’s rebuffed the bid. Casey’s, with more than 1,500 locations, had said the bid “significantly undervalues” the company, and its board has recommended that shareholders reject the offer. The Canadian chain began an unsolicited tender offer for Casey’s last month, urging the U.S. company to accept the bid of face a proxy fight. Couche-Tard plans to nominate a slate of nine independent candidates for election to Casey’s board.
Couche-Tard’s increased all-cash offer represents a 26% premium over the one-year average closing share price of Casey’s as of April 8, 2010 (the last trading day prior to the public disclosure of Couche-Tard’s proposal), a 20% premium over the 90-calendar day average closing share price of Casey’s as of April 8, 2010, and a 16% premium over the closing price of $31.59 per share of Casey’s on April 8, 2010.
Couche-Tard’s increased offer also represents a 12% premium to the all-time and 52-week high trading price of common stock of Casey’s trading prior to April 8, 2010. By contrast, Couche-Tard noted that the mean for all unsolicited cash offers over $1 billion since 1997 represents a 31% discount to the target companies’ respective all-time highs and a 6% discount to their respective 52-week highs.
Couche-Tard’s offer implies a last 12 months (as of April 30, 2010) EBITDA multiple of 7.2x and a price of $1.25 million per store, which compares favorably to corresponding metrics of publicly-traded companies and precedent transactions in the convenience store industry.
Couche-Tard believes its increased offer is even more attractive considering that stock values have fallen since Couche-Tard publicly disclosed its offer. Since April 8, 2010, the S&P 500 Index and S&P Retail Index have declined 10% and 16%, respectively. Couche-Tard believes that absent its offer, Casey’s stock would have traded i
n line with the S&P 500 Index and the S&P Retail Index and therefore its increased $36.75 per share cash offer would represent a premium of 29% and 38%, respectively.
“We continue to firmly believe that a combination of Couche-Tard and Casey’s is in the best interests of the shareholders and other constituencies of both Casey’s and Couche-Tard,” said Alain Bouchard, president and CEO of Couche-Tard. “Our increased $36.75 per share cash offer is well above the value that Casey’s, on its own and in any reasonable timeframe, could deliver to its shareholders and allows the shareholders of Casey’s to receive a significant cash premium for their investment.”
“This enhanced all-cash offer reflects our discussions with the shareholders of Casey’s and demonstrates our commitment to this transaction and confidence in our ability to consummate it in a timely manner,” Bouchard said. “Despite the fact that Casey’s Board and management team 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, including commencing costly and meritless litigation against Couche-Tard and putting in place lucrative golden parachute arrangements for Casey’s executives, we and our advisors stand ready to negotiate with Casey’s and its advisors a mutually acceptable agreement. Now is the time to put our two great companies together.”
In addition to seeking election of its nine independent director nominees, Couche-Tard seeks to repeal any new By-Laws or amendments to the By-Laws of Casey’s adopted by the Board of Directors of Casey’s, without shareholder approval, after June 10, 2009 (the date of the last publicly disclosed amendment to the By-Laws of Casey’s) and prior to the adoption of this proposal by the shareholders of Casey’s.
Bouchard added, “We are confident our director nominees will bring independent oversight and accountability to the Casey’s Board. We encourage Casey’s shareholders to send a clear and strong message to the Casey’s Board that they want directors who will act in their best interests.”
Couche-Tard’s tender offer is scheduled to expire at 5 p.m., New York City time, on Friday, Aug. 6, 2010, unless further extended. Except for the price increase, all other terms and conditions of the tender offer remain unchanged.
Casey’s fell 13 cents to $36.01 yesterday in Nasdaq Stock Market trading. The shares have gained 13% this year. Couche-Tard rose 86 cents, or 4.2%, to $21.31 yesterday on the Toronto Stock Exchange.