Casey's Takeover Plot Thickens

The drama over the hostile takeover attempt of Casey's General Stores Inc. by Canada-based Alimentation Couche-Tard has heightened, as some of the Midwest retailer's shareholders push for the chain to open up negotiations.

Last month, ClearBridge Advisors LLC of New York, an institutional shareholder in Casey's General, wrote to the board of the Ankeny, Iowa-based c-store chain, urging it to engage in formal negotiations with the management team of Couche-Tard.

"We urge the management and the board of directors of Casey's to engage in formal negotiation," the letter stated. "Anything less gives the impression that independence, not the maximization of shareholder value, is the board's highest priority."

ClearBridge, which beneficially owns 810,739 of Casey's almost 51 million outstanding shares, supports the board's argument that Couche-Tard's bid is undervalued. "We also believe that the offer does not account for the revenue synergies and cost savings created through a combination of Casey's and Couche-Tard," said the letter.

It continued: "The board's intransigence discourages a higher offer and could result in shareholder wealth destruction should the Couche-Tard tender offer be withdrawn and not accepted by shareholders."

Meanwhile, a Casey's General shareholder filed a lawsuit against the company, claiming the retailer is neglecting company stockholders by failing to complete "an appropriate evaluation of all alternatives" as the company seeks to block the hostile takeover attempt.

The would-be class action, filed by West Des Moines attorney J. Barton Goplerud representing veterinarian Richard Howie, asks a Polk County judge to block "any material transactions or changes to Casey's business and assets."

It claims Casey's chief executive and board members have breached their fiduciary duty to shareholders by refusing to negotiate with Couche-Tard.

"A fully negotiated transaction will likely deliver higher value for Casey's stockholders than a hostile acquisition," according to court documents. "The board is obligated to negotiate and explore Couche-Tard's offer in order to define what course is in the best interests of Casey's public stockholders."

Casey's also faces a similar lawsuit filed by a separate lawyer in April.

And in an attempt to further its takeover of Casey's, Couche-Tard is challenging the constitutionality of several Iowa laws. It filed court papers arguing three Iowa anti-takeover laws are contrary to U.S. law, and create an unconstitutional barrier to its hostile bid. Iowa's laws apply only to publicly traded companies that are incorporated there.

Such laws "purport to allow the board in dealing with an attempted takeover to take the interests of members of the community and employees into account and not limit the board's field of consideration to shareholders," David Walker, Drake University law professor, said in published reports.

Iowa law calls for a three-year waiting period on most acquisitions by hostile suitors. The laws allow company boards of directors to institute "poison pills" that inflate the cost for hostile buyers by giving shareholders access to cheap new stock. One allows board members to place several "community interest factors" ahead of shareholder value when 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.

Similar laws elsewhere have been found valid, however, and Iowa's laws have never been challenged in court.

Couche-Tard also seeks a court order banning Casey's leadership from implementing further defenses. The Canadian operator objects to the "poison pill" and to changes to contracts that could lead to larger severance checks for 12 Casey's executives if they are fired within two years of the company changing hands.

Couche-Tard contends the new agreements were completed "for the purpose of entrenching incumbent management and serving as a further obstacle to the proposed acquisition."

"A fully negotiated transaction will likely deliver higher value for Casey's stockholders than a hostile acquisition." LETTER FROM CLEARBRIDGE ADVISORS LLC