7-Eleven Said in Talks With Casey's, Thwarting Couche-Tard Bid
7-Eleven Said in Talks With Casey’s
Robert Gilhooly/Bloomberg
7-Eleven offered $40 a share, trumping Couche-Tard’s $38.50 bid, said the people, who declined to be identified because the talks are in progress. Casey’s said yesterday that it was in discussions with a third party that made a $40-a-share bid.
7-Eleven offered $40 a share, trumping Couche-Tard’s $38.50 bid, said the people, who declined to be identified because the talks are in progress. Casey’s said yesterday that it was in discussions with a third party that made a $40-a-share bid. Photographer: Robert Gilhooly/Bloomberg
Sept. 9 (Bloomberg) -- Bloomberg's Gigi Stone reports on the latest breaking news and top stories in today's Business Briefs. (Source: Bloomberg)
7-Eleven Inc., operator of the eponymous convenience-store chain, is in talks to buy Casey’s General Stores Inc., thwarting Alimentation Couche-Tard Inc.’s purchase attempts, said two people with knowledge of the matter.
The unit of Japan’s Seven & I Holdings Co. offered $40 a share, trumping Couche-Tard’s $38.50 bid, said the people, who declined to be identified because the talks are in progress. Casey’s said Sept. 7 it was in discussions with a third party that made a $40-a-share bid.
The offer is an all-cash deal, fully financed, valued at more than $2 billion, the people said. It potentially sets up a battle for Casey’s more than 1,500 stores through the U.S. Midwest. Couche-Tard has sought to buy Casey’s for the past five months, raising its bid twice in an effort to sway the board.
“Couche-Tard has said all along they want to keep Casey’s as it is,” said Bill Kavaler, analyst at New York-based Oscar Gruss & Son Inc. “If 7-Eleven wants Casey’s to change its stores to 7-Elevens, I don’t understand why you’d do this. To radically alter the brand is paying for something you effectively throw away.”
Casey’s said Sept. 7 the third-party bid fails to reflect the stock’s value and that its board authorized discussions to see if the parties can reach an agreement. Couche-Tard said then that Casey’s report of a higher offer showed the Ankeny, Iowa- based chain was trying to “artificially inflate” the stock.
U.S. Expansion
Seven & I fell 9 yen to 1,963 yen on the Tokyo Stock Exchange today. Casey’s rose 82 cents to $43.95 at 4 p.m. New York time in Nasdaq Stock Market trading. Couche-Tard, based in Laval, Quebec, fell 14 cents to C$23.05 in Toronto Stock Exchange trading.
Acquiring Casey’s would build on Seven & I’s network of 6,389 convenience stores in North America as it seeks to expand outside the shrinking Japanese market.
The Tokyo-based company’s North American operating income gained 9.6 percent last fiscal year excluding currency movements, compared with a 12 percent decline in its Japanese business. Seven & I, which generates 87 percent of earnings in Japan, has been closing stores in its home market amid a shrinking population and stagnant economic growth.
“After a period of being focused on restructuring its domestic business, it’s now a good to time to look for the next phase of growth,” said Naozumi Nishimura, a Tokyo-based analyst at equity research company Toward the Infinite World Inc. “The strong yen also means it’s a good time to buy.”
Currency Advantage
A stronger yen, which yesterday reached a 15 year-high against the dollar, makes overseas acquisitions cheaper for Japanese companies.
In the past five years, the median multiple paid for a retail convenience-store chain was 8.7 times earnings before interest, taxes, depreciation and amortization. If 7-Eleven pays $40 a share for Casey’s, the multiple will be 7.7 times Ebitda, according to data compiled by Bloomberg.
Couche-Tard last increased its bid for Casey’s Sept. 1. The chain aims to use the purchase to expand in the U.S., where Casey’s has stores in Illinois, Iowa and Missouri. Couche-Tard said Sept. 7 that it’s pleased that Casey’s is considering a possible sale, and that it aims to participate in an auction for the company.
The Wall Street Journal reported the bid by Dallas-based 7- Eleven yesterday.
Raymond Pare, chief financial officer at Couche-Tard, and Casey’s CFO Bill Walljasper didn’t immediately return calls seeking comment. Margaret Chabris, a spokeswoman for 7-Eleven, declined to comment.
To contact the reporters on this story: Jeffrey McCracken in New York at jmccracken3@bloomberg.net; Alex Sherman in New York at asherman6@bloomberg.net
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