Is Couche-Tard Out?

After Casey’s shareholders rejected Couche-Tard’s nominees for the board of directors last week, and instead reelected its standing board, analysts are weighing in on whether or not Couche-Tard is out of the game and whether 7-Eleven will come through with a bid.

U.S. billionaire and hedge fund manager Steven Cohen, founder of SAC Capital Advisors LP, seems to believe Casey’s General Stores’ stock is headed higher either through a deal with 7-Eleven, or potentially another transaction. Cohen has purchased roughly 2.38 million shares of Casey’s common shares for US$96.4-million, translating into an average price per share of US$40.46, the Financial Post reported. The purchase was made investment purposes only and not to exert control over the company, according to the filing.  

Shareholders now must wait to see if an opening bid for Casey’s from 7-Eleven of US$40 per share turns into a binding offer.

Meanwhile, Quebec-based Alimentation Couche-Tard Inc. is in a difficult position, as its all-cash bid of US$38.50 per share is not high enough to be taken seriously in the bidding game, according to analysts.

“Unless [Couche-Tard] raises its offer to at least the US$40 range, it is difficult to see how it can be part of the current process,” RBC Dominion Securities Inc. analyst Irene Nattel said in a research note Friday. “But for [the company], at prices in the US$40-plus range, return calculations start to erode.”

Analyst Ben Brownlow at Morgan Keegan & Co. told the Financial Post he expects the final transaction price to be well above US$40 a share if Casey’s and 7-Eleven come to an agreement.

Couche-Tard has said it would be willing to consider raising its US$2-billion bid if it receives the same cooperation and access that Casey’s is extending to 7-Eleven.

“We expect the transaction process will remain drawn out over the next couple of months, should Couche-Tard increase its offer,” Canaccord Genuity analyst Derek Dley said in a note to clients.

 

Source: Financial Post

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