Couche-Tard Versus Iowa

Alimentation Couche-Tard plans to challenges the constitutionality of several Iowa anti-takeover laws as part of the company’s hostile bid to purchase Casey’s General Stores, the Des Moines Register reported.

Couche-Tard, which operates 5,883 convenience stores in the U.S. and Canada, filed court papers late last week alleging that three Iowa statutes contradict U.S. law, creating an unconstitutional barrier to its attempted purchase of Casey’s, a publicly owned company with 1,513 stores in nine Midwestern states.

Iowa’s takeover laws apply only to publicly traded companies incorporated in Iowa and place a three-year waiting period on most acquisitions by hostile suitors. The laws also let company boards of directors use a  “poison pill” defense to inflate the cost for hostile buyers by giving shareholders access to cheap new stock. One provision also allows board members to consider “community interest factors” ahead of shareholder value in determining whether to accept an unwelcome bid.

“Collectively, these measures pose irreparable harm to Couche-Tard and all other Casey’s shareholders by denying Couche-Tard the unique opportunity to acquire Casey’s and by depriving Casey’s shareholders of the opportunity to receive maximum value for their shares,” Couche-Tard argued in the lawsuit. “Unless the court orders the relief requested, the substantial benefits of the proposed acquisition likely will be lost forever.”

Drake University law professor David Walker told the Des Moines Register the laws in question were put into place during a sting of 1980s mergers and a U.S. Supreme Court decision that approved a similar law in Illinois.

Similar laws that have been challenged elsewhere have reportedly been found valid, but Iowa’s versions of the laws have never been challenged in court.

The claims by Couche-Tard, are its first formal response to a June 11 lawsuit filed by Casey’s. Couche-Tard also is seeking a court order that would prevent Casey’s leadership from implementing further takeover defenses. Couche-Tard has objected both to a “poison pill” approved by Casey’s board members in April and to a series of recently changed employment contracts that could lead to larger severance checks for 12 top Casey’s executives if they were fired within two years of the company’s changing hands.

Couche-Tard court papers contend the new agreements were completed “for the purpose of entrenching incumbent management and serving as a further obstacle to the proposed acquisition.”

According to documents filed this month with the U.S. Securities and Exchange Commission, Casey’s top five executives would split nearly $8.3 million in severance pay if the takeover went through. Combined, the top 12 executives own slightly more than one million shares of stock, worth roughly $37.5 million if the sale happens.

Couche-Tard has offered Casey’s stockholders $36 a share as part of a proposal scheduled to expire July 9. Couche-Tard is working to elect its own slate of Casey’s board members, come the September election.

Casey’s leaders insist Couche-Tard’s offer vastly undervalues the company’s earning potential. On June 11, Casey’s sued Couche-Tard for alleged securities violations connected to what it called “a classic pump-and-dump scheme” after Couche-Tard  sold 1.75 million shares of Casey’s stock. Casey’s stock peaked at $39.50 on April 14 but closed Monday at $35.52. The Canadian company reportedly received a price of $38.43 per share for its Casey’s stock and netted a profit of nearly $14 million.





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