Casey’s Opts for Recap
The $500 million self-tender offer, funded with debt and available cash, is the company’s answer to Couche-Tard’s hostile bid.
July 28, 2010
Casey’s General Stores, faced with a revised tender offer from Alimentation Couche-Tard, countered with a $500 million recapitalization plan, in which the company will use debt and available cash to repurchase roughly 25% of its outstanding shares. Casey’s, whose board rejected Couche-Tard’s $36.75 per share offer as inadequate, aims to execute the recap through modified “Dutch auction” self-tender, valuing the company’s common stock at between $38 and $40 a share.
While Couche-Tard, predictably, has issued a statement against the recapitalization, analysts largely cheered the move.
RBC Capital Markets, in a research note found on Thomson One Analytics, cited that assuming the recap is funded with $450 million of new debt, the company would still have a debt/Ebitda multiple of a “manageable” 1.8x for 2012. The RBC analysts added that the ball is now in Couche-Tard’s court.
“The next move must come from [Couche-Tard]: walk away or raise the offer to above $38 to $40 a share, because although [Casey’s]s is only repurchasing 25% of the shares at that price, the resulting earnings accretion suggests that the shares should trade in that range with no takeover premium,” the analysts wrote.
Goldman, Sachs & Co. is acting as financial advisor to Casey’s, and Cravath, Swaine & Moore LLP and Ahlers & Cooney, PC are providing legal advice.
For more information on related topics, visit the following:
