Casey's General Stores Ripe for Sale Leaseback of Store Portfolio?

BusinessWeek - December 14, 2006

Shares of Casey's General Stores rose on Thursday after an analyst upgraded the convenience store operator. Analyst Karen Short of Friedman Billings Ramsey Group Inc. said Casey's prepared food business is "healthy and growing" and the stock is stable and trading less on gas margin sentiment.

Short also looked at Casey's real estate portfolio and said if the company were to perform a sale-leaseback, which is when real estate is sold to an outside business, and then leased back to the seller, the company could get $755 million in cash proceeds. The value of the real estate should be reflected in the stock, Short said. Finally, Short said Casey's could be attractive to a buyer.

"We would argue Casey's could be an extremely attractive target given the portfolio of owned real estate, extremely low leverage, and steady cash flow from the prepared foods business," wrote Short in a note on Thursday. She upgraded the stock to "Outperform" or "Buy," from "Market Perform," or "Hold." Shares were up 67 cents, or 2.8 percent, to $24.32 in afternoon trading on the Nasdaq, after earlier trading as high as $24.65. Sphere: Related Content