Wednesday, August 11, 2010

Casey's Counters Couche-Tard's Hostile Bid for Casey's 1,500 Store Property Portfolio

Winnipeg Free Press - August 10, 2010

Casey's General Stores says it has armed itself with more than enough cash to finance its self-tender offer against Alimentation Couche-Tard's hostile takeover bid after completing a US$569 million private placement financing.

The placement with a series of insurance companies involves (5.22%) senior unsecured notes due in 2020.

The Iowa-based convenience store company originally planned to use cash on hand and debt to fund the US$500 million recapitalization plan and buy back its shares in a move to raise its stock price and thwart the Couche-Tard offer.

But demand was so strong for the private placement that it will use only debt to purchase 25 per cent of its shares at between US$38 and US$40 each.

The remaining money will be used for fees and expenses in connection with the offer, along with a US$59 million repayment of other senior notes holding a higher interest rate. Any extra funds will be directed at general corporate expenses.

"We are excited that we are able to move forward with our highly accretive recapitalization plan, while maintaining a strong balance sheet and continuing to execute on our strategic initiatives," the company told its employees.

Casey's (Nasdaq:CASY) shareholders have until midnight on Aug. 25 to tender their shares to the company's modified Dutch auction.

Quebec-based Couche-Tard (TSX:ATD.B) extended its US$36.75 per share offer until Aug. 30.

Ben Brownlow, a Casey's analysts with Morgan, Keegan & Company, said he believes Couche-Tard will walk away from the battle by not extending the offer.

"I would be surprised if Couche-Tard went through with a higher offer because if they did so it would be contradictory to their prior trades," he said in an interview.

Brownlow has a US$44 per share target on Casey's shares. He said the recapitalization is very favourable to all shareholders and will lead to a doubling in the return on equity.

Casey's is holding its annual meeting on Sept. 23.

If it doesn't withdraw, Couche-Tard has indicated it plans to nominate eight directors and says it plans to ask shareholders to repeal any bylaws or amendments adopted by the board after June 10, 2009. The move is designed to remove a further roadblock designed to thwart Couche-Tard's takeover plan.

The U.S.-based convenience store operator has urged shareholders to reject both efforts and not use blue proxies sent by Couche-Tard "even in protest."

"Couche-Tard is attempting to utilize the strong balance sheet and real estate position built by Casey’s to subsidize the Couche-Tard Offer and transfer value to Couche-Tard’s shareholders," Casey's said in a proxy filing with the U.S. Securities and Exchange Commission.

Casey's owns 98 per cent of the land and buildings at its 1,500 stores, headquarters and distribution centre. It said Couche-Tard could use this real estate to subsidize its offer through sale-leaseback transactions, as it has done in prior acquisitions.

Couche-Tard declined to comment Tuesday on progress in obtaining financing for its US$1.9 billion takeover. The company has said it is confident about obtaining the financing when required.

But Casey's told its shareholders that its rival has no committed financing more than three months are submitting its offer.

Couche-Tard runs a network of 5,878 convenience stores, 4,146 of which include motor fuel dispensing, across North America.

On the Toronto Stock Exchange, Couche-Tard's shares fell 31 cents at C$21.00 in afternoon trading. Casey's shares were down 19 cents at $38.11 on Nasdaq. Sphere: Related Content

No comments:

Wikinvest Wire