A 7-Eleven shop in the U.S.Tim Boyle
Alimentation Couche-Tard Inc. faces a challenge of epic proportions if it has to do battle against the giant of U.S. convenience store chains - 7-Eleven - in its efforts to acquire Casey's General Stores Inc.
"Couche-Tard has met its match," Ben Brownlow, analyst with Morgan Keegan & Co., said in an interview yesterday after a published report identified 7-Eleven as the mystery suitor for Iowa-based Casey's, with a $40 (U.S.) per share, above the Laval, Que.-based company's $38.50 offer.
7-Eleven is North America's biggest convenience-store chain and has the resources and the staying power if it comes to a bidding war, he said.
"Yes, Couche-Tard could still pull it off but I would say that 7-Eleven at this point wants it more, given that their opening offer is $40," said Mr. Brownlow.
Couche-Tard president and chief executive officer Alain Bouchard and his team are know for their disciplined approach to takeovers and aversion to overpaying for targeted assets.
The Wall Street Journal on Wednesday identified the mystery bidder for Casey's as privately held 7-Eleven, a Japanese conglomerate that boasts about 38,000 stores around the world.
A 7-Eleven spokeswoman in the Dallas-based North American head office said Wednesday that the company has no comment on the report. "We are a growth company and we have been growing over the past few years, but we won't comment on this specific transaction," said Margaret Chabris.
Officials at Couche-Tard and Casey's did not respond late Wednesday to requests for comment.
7-Eleven's North American division reported revenue of $16.7-billion last year. It has about 6,000 owned, operated and franchised stores in the U.S., about 4,700 of which are franchised out.
Couche-Tard first informally approached Iowa-based Casey's - which has about 1,500 stores centered in the U.S. Midwest - last year but was rebuffed. It came back in April with a formal, unsolicited offer but was again rebuffed and has been involved in a nasty public skirmish with Casey's ever since.
On Tuesday, Casey's said it received a preliminary proposal from an unnamed "strategic third party" for a friendly deal but added that the overture "substantially undervalues" the company.
Couche-Tard attacked the decision to enter into talks with another party and questioned the timing because of a shareholder vote on a new slate of Casey's directors set for the annual meeting Sept. 23. The slate was nominated by Couche-Tard.
"We believe this is another maneuver orchestrated by the Casey's board to artificially inflate its stock price leading up to the shareholder vote," Couche-Tard said in a statement.
On Wednesday, Couche-Tard said it has reached an agreement in principle with the U.S. Federal Trade Commission to sell 25 Casey's stores and gas stations to address competition concerns if it is successful in its takeover.
Michael Van Aelst, an analyst with TD Securities Inc. said in a research note Wednesday - published before the report about 7-Eleven - that the arrival of a rival bidder could actually be positive for Couche-Tard in that it might boost Casey's shareholders' backing of its slate of directors, who in turn would be more likely to open up the bidding process in hopes of getting the best price through a bidding war.