Couche-Tard’s Bid Gains Appeal

A recent drop in the S&P 500 might help Quebec-based Alimentation Couche-Tard’s hostile US$1.9-billion ($36 per share) bid for Casey’s General Stores look like a more attractive option, an industry analyst told the Winnipeg Free Press.

Martin Landry of Desjardins Securities told the paper that the 14% premium offered by Couche-Tard has increased in appeal due to the 14% drop in the index since April 8, which has effectively raised that premium to 28%. That is closer to the 32% median premium paid for all-cash acquisitions of U.S. companies in transactions valued at US$1 billion to US$3 billion in 2009 and 2010.

When Ankeny, Iowa-based Casey’s recommended that shareholders reject Couche-Tard’s offer last month, it called attention to the premium gap.

“While we are still a long way from a completed transaction, we believe recent stock market weakness works in Couche-Tard’s favor and increases the likelihood that the Casey’s transaction will be completed,” Landry commented. 

Landry expects Casey’s could add 20-30 cents per share to Couche-Tard’s annual results. That would help to increase his price target for Couche-Tard shares by C$2.50 from his current level of C$21.50. He also expects Couche-Tard to disclose during next week’s fourth-quarter results that general inflation and its hostile takeover bid for Casey’s will cost US$13 million during the quarter.

Couche-Tard may extend its July 9 midnight deadline for Casey’s shareholders to tender their shares if they haven’t secured enough of the target company’s stock. But if about half the shares have been tendered, it will likely disclose that to “send a signal” to Casey’s management and board of directors that the majority of shareholders favor the deal, Winnipeg Free Press reported.

“There would therefore likely be significant pressure on Casey’s management to sit down with Couche-Tard and come to an agreement,” Landry added.




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