Casey's Sues To Block Takeover

"The No. 1 challenge is to get employees to be customer focused, and I think in the future, technology is going to be one of the things that bridges the gap."

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QUICK FACT In 2009, 66 percent of c-store chains reported using BI systems, and this year the number jumped to 74 percent.

Source: Convenience Store News' 2010 Technology Study

Alimentation Couche-Tard brings offer to shareholders, accused of market manipulation

In the latest round of blows in a hostile takeover battle between Canadian c-store operator Alimentation Couche-Tard Inc. and Ankeny, Iowa-based Casey's General Stores Inc., the Midwest retailer filed a complaint last month in the United States District Court for the Southern District of Iowa, alleging Couche-Tard violated federal securities laws in connection with its takeover attempt.

According to Casey's, when Couche-Tard made its $36-pershare offer for Casey's public on April 9, it had accumulated a stake of 1,975,362 Casey's shares, representing approximately 3.9 percent of those issued. And following its announcement of the offer, Couche-Tard sold almost all its shares for $38.43 per share, totaling 17 percent of the total trading volume for Casey's stock during market hours that day.

The complaint alleges that with Couche-Tard's announcement of its intent to takeover Casey's, the company then sold its shares, and "simultaneously reaped millions of dollars of profit by trading on the market's reaction to its own announcement, and artificially depressed the run up in Casey's stock price that otherwise would have followed Couche-Tard's announcement of its takeover bid."

As part of the complaint, Casey's is seeking an injunction preventing Couche-Tard from taking further steps to pursue the hostile takeover, among other measures.

In response, Couche-Tard stated: "We believe this lawsuit is entirely without merit, and we will vigorously defend against these baseless claims. We are disappointed that the Casey's board of directors has chosen to proceed down this path, which we believe is designed to distract Casey's shareholders from focusing on the real issue — our all cash, premium bid for Casey's."

Casey's legal action followed a $36-per-share tender offer by the Canadian company. Couche-Tard executives hoped that by going directly to shareholders, the board of directors would open up to negotiations.

"We hope to see Casey's management accept our offer," Raymond Pare, CFO of Couche-Tard, told Convenience Store News when the tender offer was announced. "We encourage shareholders to take steps to work with Casey's to bring them to the table."

The cash offer — totaling $1.9 billion — represents the full value of Casey's, the executives said.

"This is what we are willing to pay, and we're strong buyers at $36 per share," Pare said. "It is full value at this price."

The combination of Casey's General Stores and Couche-Tard would be beneficial for all parties involved, Couche-Tard shareholders told CSNews.

"This transaction would form a stronger, more competitive player in the market areas, and be good for shareholders of both companies," said Pare, noting there are only 28 Couche-Tard locations within a mile of Casey's stores.

Alain Bouchard, Couche-Tard president and CEO, added: "It's part of our plan to buy more stores, and Casey's is a perfect fit with our geography. We like their foodservice model for their rural stores, and we can add value to their stores and learn from their expertise on foodservice."

In an investor presentation obtained by CSNews, Couche-Tard detailed its integration strategy, including the impact on stores, should the merger come to fruition. Couche-Tard's decentralized business model would allow Casey's to be run as a stand-alone business unit, and the Casey's store banner will remain in place with no rebranding or remodels required, Couche-Tard stated. The chain would continue to grow as a rural store format, and Couche-Tard would possibly leverage Casey's wholesale and distribution capabilities, while potentially implementing the best practices from both chains in their respective counterparts. It also noted no significant capital expenditures would be required to integrate Casey's.

Days after the tender offer was announced, the board of directors for Casey's recommended shareholders reject the offer, stating it substantially undervalues the company.

"We believe this is a self-serving and transparent attempt by Couche-Tard to take significant value that rightly belongs to Casey's shareholders," Robert J. Myers, president and CEO of Casey's, said in a statement. "We believe our shareholders will reap far greater value from our industry leading performance, significant growth opportunities, successful execution of our strategic initiatives, strong balance sheet and real estate position, and the benefits of our highly differentiated business model and well-regarded self-distribution system."

And in response, Couche-Tard issued a statement saying: "We are disappointed that the Casey's board of directors has recommended that its shareholders reject our … offer without any discussion or negotiation with us."

In addition, Couche-Tard also named a slate of nine independent candidates that it plans to nominate for election to the Casey's General board of directors at the Midwest retailer's 2010 annual shareholder meeting.

"Though it remains our strong preference to enter into a negotiated transaction with Casey's, we are committed to pursuing a combination of our two companies. To reinforce that commitment, we are nominating a full slate of nine directors for election to the Casey's board who will exercise independent judgment in considering the Couche-Tard tender offer," Bouchard said in a statement.

In response, Myers stated the nominations are "clearly an attempt by Couche-Tard to gain control of Casey's and force through its inadequate proposal to acquire the company."

Goldman, Sachs & Co. is acting as financial advisor to Casey's, and Cravath, Swaine & Moore LLP and Ahlers & Cooney PC are providing legal advice.

Credit Suisse Securities (USA) LLC is acting as financial advisor to Couche-Tard and dealer manager for Couche-Tard's offer, and Dewey & LeBoeuf LLP is acting as legal counsel. Innisfree M&A Inc. is acting as information agent for Couche-Tard's offer.

Log onto www.csnews.com for daily news.

"We believe this is a self-serving and transparent attempt by Couche-Tard to take significant value that rightly belongs to Casey's shareholders." ROBERT J. MYERS, CASEY'S GENERAL STORES INC.

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