Ankeny, Iowa-based Casey’s General Stores Inc. has filed with the Securities and Exchange Commission a definitive proxy statement and a letter sent to Casey’s shareholders from Casey’s President and CEO Robert Myers.
The letter, dated Aug. 12, informed shareholders that Casey’s has nominated all of its directors for reelection and urged shareholders to vote for them at the annual meeting scheduled Sept. 23.
“Alimentation Couche-Tard Inc. is attempting to replace your Board with its hand-picked slate of nominees. We believe this is simply an attempt to advance its inadequate, unsolicited offer for Casey’s. Under the leadership of our current Board, Casey’s is already creating far greater value for shareholders than is reflected in Couche-Tard’s offer. We urge you to discard any blue proxy cards you receive from Couche-Tard and vote the enclosed WHITE proxy card today,” the letter said.
The letter went on to assure shareholders that it expects inside same-store sales growth to trend favorably over the remainder of the 2011 fiscal year.
For the fiscal year ended April 30, 2010, the Casey’s inside-sales margin was 42%, driven by a 64% margin in the Casey’s proprietary prepared food program. This performance exceeds the 34% average inside-sales margin achieved by convenience store peers during the same period, Casey’s reported. Same-store gasoline gallons growth is also strong with gasoline margins consistently above the company’s fiscal 2011 goals of 13.5%.
“Casey’s is on track with its strategic initiatives, including incorporating its exciting new store design program across the Company’s store base. The new larger store design capitalizes on high-margin, high-turning categories and includes increased cooler capacity, expanded coffee and fountain offerings and a made-to-order sub-sandwich program. To date, including acquired stores, Casey’s has incorporated the features of the new store design in 132 of its approximately 1,500 stores. Initial results have been very positive with significant increases above the chain-wide average in high margin prepared food sales,” the letter added.
Casey’s board said it believes Casey’s is undervalued at current trading levels and has approved a $500 million recapitalization plan to acquire about 25% of the company’s outstanding shares. The recapitalization plan, which is being funded through a private placement of 5.22% senior unsecured notes due 2020, is set to be executed through a modified “Dutch auction” self tender offer for up to $500 million of Casey’s stock at a price of $38.00 to $40.00 per share. Casey’s noted the recapitalization plan is expected to generate significant value for Casey’s shareholders; be highly accretive to Casey’s diluted EPS at all prices in the offer range; and allow shareholders to continue participating in the Company’s “substantial upside.”
“The Casey’s Board thoroughly reviewed Couche-Tard’s offer — both at its original offer price of $36.00 per share and its slightly increased offer price of $36.75 per share — and determined that the Couche-Tard offer is not in the best interests of Casey’s, its shareholders and other constituencies,” the letter said. “We note that the number of shares tendered into Couche-Tard’s offer has declined from 19.2% of Casey’s outstanding shares on July 12, 2010 to just 12% as of August 2, 2010. The low — and declining — number of shares tendered clearly shows a lack of support for Couche-Tard’s offer, notwithstanding its slight increase in offer price. We continue to recommend that shareholders NOT tender their shares into the Couche-Tard offer.”
Casey’s Board of Directors, consists of seven independent members out of eight total directors. Under the board’s leadership, Casey’s reported that it has:
– Consistently outperformed its peer group’s stock performance and the broader market. In the three year period prior to the public announcement of the Couche-Tard offer, Casey’s stock increased 24% while the convenience store peer group experienced an average decrease of 46% and the S&P 500 decreased 18%;
– Continued to have the highest inside-same stores sales margins in the industry, which have enabled it to achieve double-digit annual earnings per share (EPS) growth over the five fiscal years ended April 30, 2010;
– Increased its dividend at a compounded annual growth rate of approximately 17.3% over the past five years, and increased its dividend again at the start of fiscal 2011. The Company’s dividend payout ratio for the fiscal year ended April 30, 2010 was 15%, the highest ratio among industry peers; and,
– Achieved positive inside same-store sales growth for 26 consecutive quarters, averaging 5.9% for the five fiscal years ended April 30, 2010, versus the convenience store peer average of 3.5% for the comparable fiscal period.