UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
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CASEY’S GENERAL STORES, INC.
(Name of Registrant as Specified in its Charter)
ACT ACQUISITION SUB, INC.
ALIMENTATION COUCHE-TARD INC.
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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The following are presentation materials of Alimentation Couche-Tard Inc.:
Alimentation Couche-Tard Offer to Acquire Casey’s General Stores September 2010 |
1 Important Information This communication does not constitute an offer to buy or solicitation of an offer to sell any securities. A tender offer (the “Tender Offer”) to purchase (1) all issued and outstanding shares of common stock, no par value, of Casey’s General Stores, Inc. (“Casey’s”), and (2) the associated rights to purchase shares of Series A Serial Preferred Stock, no par value, of Casey’s issued pursuant to the Rights Agreement, dated as of April 16, 2010, between Casey’s and Computershare Trust Company, N.A., as Rights Agent, at a price of $38.50 per share, net to the seller in cash, without interest and subject to any required withholding of taxes, is being made pursuant to a tender offer statement on Schedule TO (including the Offer to Purchase, Letter of Transmittal and other related tender offer materials, together with any amendments and supplements thereto) that was filed by Alimentation Couche-Tard Inc. (“Couche-Tard”) and ACT Acquisition Sub, Inc. (“ACT Acquisition Sub”) with the Securities and Exchange Commission (“SEC”) on June 2, 2010. These materials, as they may be amended from time to time, contain important information, including the terms and conditions of the Tender Offer, that should be read carefully before any decision is made with respect to the Tender Offer. Investors and security holders of Casey’s can obtain free copies of these documents and other documents filed with the SEC by Couche-Tard through the web site maintained by the SEC at http://www.sec.gov or by directing a request to the Corporate Secretary of Alimentation Couche-Tard Inc., 4204 Industriel Blvd., Laval, Québec, Canada H7L 0E3. Free copies of any such documents can also be obtained by directing a request to Couche- Tard’s information agent, Innisfree M&A Incorporated, at (877) 717-3930. Couche-Tard and ACT Acquisition Sub filed a definitive proxy statement on Schedule 14A with the SEC on August 19, 2010 in connection with the solicitation of proxies for the 2010 annual meeting of shareholders of Casey’s. The definitive proxy statement was mailed to the shareholders of Casey’s on or about August 19, 2010. Investors and security holders of Casey’s are urged to read the definitive proxy statement and other documents filed with the SEC carefully in their entirety as they become available because they will contain important information. Investors and security holders of Casey’s can obtain free copies of these documents and other documents filed with the SEC by Couche-Tard through the web site maintained by the SEC at http://www.sec.gov or by directing a request to the Corporate Secretary of Alimentation Couche-Tard Inc., 4204 Industriel Blvd., Laval, Québec, Canada H7L 0E3. Free copies of any such documents can also be obtained by directing a request to Couche-Tard’s information agent, Innisfree M&A Incorporated, at (877) 717-3930. Free copies of the definitive proxy statement and any additional proxy solicitation materials of Couche-Tard and ACT Acquisition Sub can also be obtained through the web site maintained at http://www.ReadOurMaterials.com/Couche-Tard. Certain Information Regarding Participants Couche-Tard and ACT Acquisition Sub, its indirect wholly owned subsidiary, and certain of their respective directors and executive officers, and Couche-Tard’s nominees for election to the board of directors of Casey’s at the 2010 annual meeting of shareholders of Casey’s, may be deemed to be participants in the proposed transaction under the rules of the SEC. As of the date of this presentation, Couche-Tard is the beneficial owner of 362 shares of common stock of Casey’s (which includes 100 shares of common stock of Casey’s owned by ACT Acquisition Sub). Security holders may obtain information regarding the names, affiliations and interests of Couche-Tard’s directors and executive officers in Couche-Tard’s Annual Report on Form 40-F for the fiscal year ended April 25, 2010, which was filed with the SEC on July 19, 2010, and its proxy circular for the 2010 annual general meeting, which was furnished to the SEC on a Form 6-K on July 19, 2010. These documents can be obtained free of charge from the sources indicated above. Additional information regarding the interests of these participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, is included in the definitive proxy statement filed with the SEC on August 19, 2010. Forward-looking Statements The statements set forth in this communication, which describes Couche-Tard’s objectives, projections, estimates, expectations or forecasts, may constitute forward-looking statements. Positive or negative verbs such as “plan”, “evaluate”, “estimate”, “believe” and other related expressions are used to identify such statements. Couche-Tard would like to point out that, by their very nature, forward-looking statements involve risks and uncertainties such that its results, or the measures it adopts, could differ materially from those indicated or underlying these statements, or could have an impact on the degree of realization of a particular projection. Major factors that may lead to a material difference between Couche-Tard’s actual results and the projections or expectations set forth in the forward-looking statements include the possibility that Couche-Tard will not be able to complete the tender offer as expected; Couche-Tard’s ability to achieve the synergies and value creation contemplated by the proposed transaction; Couche-Tard’s ability to promptly and effectively integrate the businesses of Casey’s; expected trends and projections with respect to particular products, services, reportable segment and income and expense line items; the adequacy of Couche-Tard’s liquidity and capital resources and expectations regarding Couche-Tard’s financial condition and liquidity as well as future cash flows and earnings; anticipated capital expenditures; the successful execution of growth strategies and the anticipated growth and expansion of Couche-Tard’s business; Couche-Tard’s intent, beliefs or current expectations, primarily with respect to future operating performance; expectations regarding sales growth, gross margins, capital expenditures and effective tax rates; expectations regarding the outcome of various pending legal proceedings; seasonality and natural disasters; and such other risks as described in detail from time to time in the reports filed by Couche-Tard with securities authorities in Canada and the United States. Unless otherwise required by applicable securities laws, Couche-Tard disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking information in this communication is based on information available as of the date of the communication. |
2 Table of contents 1. Overview of Couche-Tard’s offer 2. Couche-Tard is offering compelling value for Casey’s 3. Casey’s Board must be replaced 4. Responses to Casey’s misinformation campaign Appendix |
3 1. Overview of Couche-Tard’s offer |
4 Alimentation Couche-Tard means “late night snack” • Largest independent convenience store operator in North America by company-operated stores • #1 Canadian convenience store operator • Enterprise value of $4.8 billion and market cap of $4.3 billion as of September 1, 2010 • Alain Bouchard, President and CEO, started the chain in 1980 with a single store • Strong network of 5,869 convenience stores in U.S. and Canada • Highly decentralized operations with fewer than 20 people at corporate headquarters • Management owns approximately 22% of the company • Longstanding history of successful acquisitions • Bought Circle K from ConocoPhillips • Great opportunity for suppliers and employees of acquired companies – COO Brian Hannasch of Iowa was formerly at Bigfoot Food Stores Total stores FY2010 Sales US 78% Canada 22% 5,869 stores $16.4 billion US 65% Canada 35% |
5 Couche-Tard is committed to acquiring Casey’s Compelling offer for Casey’s shareholders • Compelling offer: $38.50 cash per Casey’s share • 53% of Casey’s shareholders tendered at $38.00 per share in Casey’s self-tender • 17% premium to all-time and 52-week high prior to our announcement on April 8, 2010 • Since we approached Casey’s in October 2009, Casey’s has not presented any alternative that provides value greater than Couche-Tard's offer • No other firm offer to buy Casey’s has appeared • High multiple relative to precedent transactions Couche-Tard has nominated eight independent nominees • Committed to acting in the best interests of Casey’s shareholders • Highly qualified nominees will bring independent oversight accountability • No historical entrenchment Casey’s Board and management do not represent Casey’s shareholders’ best interests • Refuses to meet or negotiate with Couche-Tard • Forced Couche-Tard to go public with its offer • Implemented a shareholder rights plan (“Poison Pill”) to prevent Couche-Tard from closing on its offer • Financed stock buy-back with highly unusual financing containing a poison put mechanism – Transfers ~$100MM ($2.65 / share) to noteholders – Coerces shareholders not to exercise their right to sell Casey’s or replace Casey’s Board • Enhanced management golden parachutes |
6 Couche-Tard is committed to acquiring Casey’s (cont’d) Couche-Tard has listened to Casey’s shareholders • Raised its offer above the price at which a majority of Casey’s shareholders were willing to sell their shares • Secured acquisition financing Couche-Tard is committed to a transaction • Full support of Couche-Tard’s Board and majority ownership group • Management visited over 300 Casey’s stores • Secured financing from major financial institutions • Engaged Credit Suisse, Dewey & LeBoeuf, Innisfree, Joele Frank and Nyemaster Goode, among other advisors |
7 Couche-Tard has secured financing and has ample liquidity to fund the all-cash transaction Couche-Tard has secured favorable financing with attractive terms sufficient to fund the entire cash consideration • Up to $1.5 billion 4-year unsecured term loan facility, which complements existing, unused revolver capacity of $760 million • Consortium of Canadian and international financial institutions led by: - The Bank of Nova Scotia - HSBC Bank Canada - Caisse de dépôt et placement du Québec - Rabobank Nederland, Canadian Branch • With the new $1.5 billion term loan facility, existing cash and borrowing capacity under its existing credit facility, Couche-Tard has ample liquidity to fund the all-cash transaction ($ in millions) Unused revolver capacity $760 Term loan facility 1,500 Cash on hand as of 6/20/2010 221 Total liquidity $2,481 |
8 Chronology • October 6, 2009 – Alain Bouchard contacted Robert Myers about a possible business combination only to be turned down without a discussion • November 13, 2009 – Mr. Bouchard contacted Mr. Myers again to reiterate Couche-Tard’s interest and was asked to submit any proposal in writing • March 9, 2010 – Mr. Bouchard sent a letter to Mr. Myers setting forth a proposal to acquire 100% of the outstanding shares of Casey’s at a price of $36.00 per share which was rejected without a discussion • March 30, 2010 – Mr. Bouchard sent a letter to Mr. Myers requesting that Casey’s Board reconsider the proposal and enter into negotiations, which was again turned down without a discussion • April 9, 2010 – Couche-Tard publicly disclosed its offer of $36.00 per Casey’s share • April 9 2010 – Couche-Tard sold its position in Casey's in a series of open market sales at a weighted average price of $38.43 per share, consistent with its then current view that Casey’s value was $36.00 per share • April 16, 2010 – Casey’s installed a Poison Pill to entrench Casey’s Board and management and enhanced its golden parachutes • June 2, 2010 – Couche-Tard commenced a tender offer for Casey’s at $36.00 per share • June 7, 2010 – Couche-Tard nominated a slate of independent directors to Casey's Board • July 22, 2010 – Couche-Tard increased its offer to $36.75 per Casey’s share • July 28, 2010 – Casey’s announced a recapitalization plan to purchase up to approximately 25% of Casey’s common stock at a price of $38 to $40 per share • August 10, 2010 – To finance its leveraged recapitalization, Casey’s announced an off-market debt financing with a “poison put” mechanism designed to impede any takeover attempt and coerce shareholders not to vote against Casey’s incumbent Board • August 26, 2010 – Casey’s announced the results of its self-tender; 26.8 million shares (a majority of the then outstanding shares of Casey’s) were tendered at the minimum purchase price of $38.00 per share • September 1, 2010 – Couche-Tard increased its offer for Casey’s to $38.50 per share and announced that it has secured financing • September 23, 2010 – Casey’s annual meeting of shareholders |
9 2. Couche-Tard is offering compelling value for Casey’s |
10 Casey’s shareholders have spoken on value • Casey’s tender offer for up to approximately 25% of its own stock at $38.00 to $40.00 per share expired on August 25, 2010 – 26.8 million shares – ~53% of the then outstanding shares of Casey’s were tendered at the minimum purchase price of $38.00 per share – Strong indication of value – actual holders’ sale price • Now, Couche-Tard is offering $38.50 to Casey’s shareholders – Couche-Tard's increased all-cash offer of $38.50 per share of Casey's is $0.50 per share higher than Casey’s self-tender • Why won’t Casey’s Board let its shareholders accept our offer? A majority of Casey’s shareholders were sellers at this price • Couche-Tard has been listening to Casey’s shareholders, and now it is time for Casey’s Board to do the same The results of Casey’s self-tender demonstrates that our $38.50 all-cash offer to acquire 100% of Casey’s is compelling |
11 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 $0.00 $12.83 $25.67 $38.50 Casey’s stock price performance since IPO Couche-Tard’s cash offer of $38.50 per share Source: FactSet Research Systems. Casey’s 52-week and all-time high price of $32.83 per share +17% premium Prior to Couche-Tard’s offer, Casey’s shares have never traded above $32.83 per share |
12 Casey’s is fully valued by Couche-Tard’s offer • Prior to Couche-Tard’s offer, Casey’s was covered by eight analysts, who had a mean target price of $33.74 per share – Casey’s is a well-run business, whose value was recognized by the market prior to our initial offer – The market understood Casey’s value and prospects and anticipated a good first quarter • Our premium all-cash offer recognizes Casey’s full value – 7.5x EV / LTM EBITDA is above the average multiple of 6.3x for precedent C-store transactions – $1.3 million EV per store is above the average multiple of $662 thousand for precedent C-store transactions – 32% premium over the one-year average closing share price of $29.14 (prior to April 8, 2010) – 26% premium over the 90-calendar day average closing share price of $30.68 (prior to April 8, 2010) – 22% premium over the unaffected closing share price of $31.59 on April 8, 2010 – 17% premium to the all-time and 52-week high trading price of $32.83 (prior to April 8, 2010) • Volatile gasoline margins are currently at their peak – Couche-Tard is paying a high multiple on peak gasoline earnings, despite gasoline margin volatility • Our offer fully values Casey’s owned real estate – Minimal intrinsic real estate value (small, rural and limited alternative uses and very little available for sale-leaseback) • Few synergies with Couche-Tard – Limited operations overlap – Casey’s is not a turn-around story; currently a well operated business |
13 Couche-Tard is paying a high multiple on peak gasoline earnings, despite gasoline margin volatility • Gasoline retail sales constitute 68.5% of Casey’s FY2010 sales and 22.5% of Casey’s FY2010 gross profit • Recent industry retail gasoline margins are unsustainably high and have benefited from: – A slow and steady decline in underlying crude prices from their peak of $145 in July 2008 to $72 currently – Retail prices are sticky and do not decline immediately even when crude prices decline. Accordingly, recent retail margins have been inflated – Hurricane activity in the Gulf during recent years has led to actual supply disruptions, which resulted in spikes in retail margins • Demand for finished motor gasoline has declined over the past five years – Across the U.S., 275.5 million monthly barrels were supplied as of June 2010, compared to 281.2 million monthly barrels during the prior five years – This trend is more pronounced in the Midwest, where 78.8 million monthly barrels were supplied as of June 2010, compared to 82.9 million monthly barrels during the prior five years 11.31¢ 9.32¢ 11.00¢ 10.20¢ 10.78¢ 11.47¢ 10.40¢ 13.90¢ 12.87¢ 13.90¢ FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 Source : Casey's public filings. Casey’s gasoline margin per gallon |
14 7.5x 5.1x 7.9x 5.1x 5.5x 8.6x 5.4x 5.8x 6.1x 6.6x Susser / Town & Country Wellspring Capital / Susser Green Valley Acquisition / Uni-Mart Couche-Tard / Circle K The Pantry / Golden Gallon (Ahold) Sunoco / Speedway SuperAmerica Uni-mart / Orloski Services Station Tosco / Exxon Apollo / Clark USA Tosco / Circle K Enterprise Value / LTM EBITDA Implied transaction multiple: 7.5x Average 6.3x Source: Public filings, press releases and research reports. Announce date: 09/07/07 12/25/05 07/04/04 10/03/03 08/03/03 02/03/03 04/21/00 12/01/99 05/01/99 02/01/96 EV ($MM) $361 $277 $90 $830 $187 $140 $41 $860 $230 $921 LTM EBITDA $49 $54 $11 $163 $31 $25 $5 $160 $35 $159 ($MM) Couche-Tard’s offer is at a premium multiple to precedent C-store transactions Excluded transaction • Excludes squeeze-out of 7-Eleven by its Japanese parent IYG Holding in 2005 – Not comparable as the purchase price included very valuable 7-Eleven licenses – 7-Eleven has a different model due to its high number of franchised stores |
15 $868 $315 $499 $1,355 $725 $494 $342 $400 $958 Wellspring Capital / Susser Green Valley Acquisition / Uni- Mart Couche-Tard / Circle K The Pantry / Golden Gallon (Ahold) Sunoco / Speedway SuperAmerica Uni-mart / Orloski Services Station Tosco / Exxon Mobil Apollo / Clark USA Tosco / Circle K Implied Couche-Tard transaction multiple: $1.3 million per store Average: $662 Source: Public filings, press releases and research reports. Note: Store count includes all stores regardless of owned vs. leased and operated vs. dealer. Enterprise Value / Store ($ thousands) Announce date 12/25/05 07/04/04 10/03/03 08/03/03 02/03/03 04/21/00 12/01/99 05/01/99 02/01/96 EV ($MM) $277 $90 $830 $187 $140 $41 $860 $230 $921 No. of Stores 319 285 1,663 138 193 43 1,740 672 2,300 Couche-Tard’s offer is at a premium multiple to precedent C-store transactions (cont’d) • Excludes purchase price multiple of the squeeze-out of 7-Eleven by its Japanese parent IYG Holding in 2005 – Not comparable as the purchase price included very valuable 7-Eleven licenses, plus 7-Eleven has a different model due to its high number of franchised stores • Susser / Town & Country EV/store multiple excluded from average as Town & Country stores generated significantly higher volume and profitability and therefore are not comparable to Casey's Excluded transaction |
16 Couche-Tard’s offer is at a premium to other all- cash unsolicited offers since 1997 Premium of final offer to 52-week high Premium of final offer to all-time high Some unsolicited offers are opportunistic, Couche-Tard’s offer is not (69%) (41%) (25%) (21%) (18%) (16%) (14%) (10%) (8%) (6%) (5%) (5%) (5%) (4%) (3%) (3%) (2%) (2%) (1%) 1% 1% 2% 2% 2% 4% 5% 5% 5% 6% 6% 8% 9% 11% 13% 14% 17% 17% 18% 19% 20% 22% 39% Blockbuster / Circuit City Stores* Vishay / International Rectifier* Pharma Services / Quintiles Transnational AlliedSignal / AMP* Koninklijke Philips Electronic / VLSI Technology Chesapeake / Shorewood Packaging* NiSource / Columbia Energy Group Nationwide Mutual Insurance / Allied Group VA Partners / Acxiom* Jerry Moyes / Swift Transportation Highfields Capital Mgmt / Circuit City Stores* Cenveo / Banta* Bristol-Myers Squibb / Imclone Systems* ArvinMeritor / Dana* Investment Group / Aramark Cadence Design Systems / Mentor Graphics* Shell Oil / Barrett Resources* BASF / Engelhard Constellation Brands / Robert Mondavi Astellas Pharma / OSI Pharmaceuticals Air Products and Chemicals / Airgas Footlocker / Genesco* Oracle / Bea* Montana Public Power / NorthWestern* Shorewood Packaging / Chesapeake* King Pharmaceuticals / Alpharma Electronic Arts / Take-Two Interactive Software* Pilgrim's Pride / Gold Kist Simon Property Group / Taubman Centers* International Specialty Prods / Dexter* Investor Group / Harrah's Entertainment Omnicare / NeighborCare Investor Group / Taubman Centers* Weyerhaeuser / Willamette Industries Elliott Associates / Novell* Computer Assoc Intl / Computer Sciences* Couche-Tard / Casey's Oracle / PeopleSoft Inbev / Anueuser-Busch Astellas Pharma / CV Therapeutics* Unilever / Bestfoods Roche Holding / Ventana Medical Systems (94%) (92%) (88%) (84%) (83%) (79%) (73%) (71%) (67%) (66%) (64%) (64%) (49%) (47%) (46%) (45%) (42%) (42%) (38%) (38%) (35%) (32%) (24%) (16%) (15%) (12%) (10%) (7%) (5%) (3%) (3%) (2%) (1%) 2% 2% 3% 6% 6% 8% 9% 11% 17% Blockbuster / Circuit City* Elliot Associates / Novell* Oracle / Bea* Highfields Capital Mgmt / Circuit City Stores* Pharma Services / Quintiles Transnational Astellas Pharma / CV Therapeutics* Oracle / PeopleSoft ArvinMeritor / Dana* Vishay / International Rectifier* AlliedSignal / AMP* Cadence Design Systems / Mentor Graphics* Bristol-Myers Squibb / Imclone Systems* King Pharmaceuticals / Alpharma Shorewood Packaging / Chesapeake* Koninklijke Philips Electronic / VLSI Technology VA Partners / Acxiom* Chesapeake / Shorewood Packaging* Astellas Pharma / OSI Pharmaceuticals Unilever / Bestfoods Electronic Arts / Take-Two Interactive Software* Weyerhaeuser / Willamette Industries Jerry Moyes / Swift Transportation Inbev / Anheuser-Busch Companies BASF / Engelhard NiSource / Columbia Energy Group Pilgrim's Pride / Gold Kist Nationwide Mutual Insurance / Allied Group International Specialty Prods / Dexter* Cenveo / Banta* Investment Group / Aramark Air Products and Chemicals / Airgas Shell Oil / Barrett Resources* Constellation Brands / Robert Mondavi Foot Locker / Genesco* Montana Public Power / NorthWestern* Roche Holding / Ventana Medical Systems Computer Assoc Intl / Computer Sciences* Simon Property Group / Taubman Centers* Investor Group / Harrah's Entertainment Omnicare / NeighborCare Investor Group / Taubman Centers* Couche-Tard / Casey's Mean: (32.7%) Mean: (0.4%) Source: Securities Data Corporation. Note: Includes all-cash unsolicited offers over $1 billion since 1997. * Denotes withdrawn transactions. |
17 Casey’s stock price would have declined if not for Couche-Tard’s offer Since Couche-Tard's public announcement on April 8th… • The hoped for “summer of recovery” didn’t materialize and fear that the economy is heading into a severe double dip recession has increased • Major market indices have declined – S&P 500 has declined 9% and the DJIA is down 6% – Approximately 77% of company stock prices listed on the NYSE are down • The economy is slowing; second-quarter GDP growth was revised downward to 1.6% from 2.4%, compared to 3.7% in the first quarter • Concern that European debt crisis will adversely affect the U.S. economy • High unemployment rate continues – 9.6% in August 2010 • Consumer spending remains weak as consumers remain nervous about jobs and the state of the economy |
18 Casey’s is correlated to the S&P 500 Retail Index • Casey’s doesn’t correlate perfectly to any index • The S&P Retail Index (1) is a capitalization-weighted index of 29 domestic equities in the retail sector, traded on the New York Stock Exchange, American Stock Exchange and NASDAQ • Casey’s stock trading is more correlated to the S&P Retail Index than it is to any other C-store company Source: FactSet Research Systems. Note: Correlation for periods ending April 8, 2010. (1) Includes AZO, BBBY, BBY, BIG, COST, CVS, DDS, DG, FDO, GPS, HD, JCP, JWN, KR, KSS, LOW, LTD, ODP, RSH, S, SHW, SPLS, SWY, TGT, TIF, TJX, WAG, WINN and WMT. See Appendix for details. Statistical correlation (R 2 10 year 5 year 3 year 2 year 1 year S&P Retail Index 18.4% 26.7% 31.1% 31.3% 28.5% S&P 500 25.6% 30.6% 35.4% 34.4% 30.2% Couche-Tard 1.1% 1.8% 2.3% 1.9% 2.2% Pantry 7.8% 18.1% 21.2% 24.0% 17.9% Susser NA NA 15.3% 18.3% 10.7% ) with Casey's |
19 Casey’s is correlated to the S&P 500 Retail Index (cont’d) Note: As of September 1, 2010. (1) Includes AZO, BBBY, BBY, BIG, COST, CVS, DDS, DG, FDO, GPS, HD, JCP, JWN, KR, KSS, LOW, LTD, ODP, RSH, S, SHW, SPLS, SWY, TGT, TIF, TJX, WAG, WINN and WMT. See Appendix for details. April 8, 2010 September 1, 2010 466 412 $31.59 $27.89 Casey's Share Price on April 8, 2010 Implied Casey's Share Price based on the S&P 500 Retail Index $38.50 Couche-Tard's all-cash offer S&P Retail Index (1) Casey’s Implied Share Price |
20 Casey’s share price would have decreased based on major market indices Source: Factset Research Systems. (1) Implied Casey’s share price based on relative change in price vs. pre-announcement price of $31.59. • Recent C-store sector stock market performance has been affected by Couche-Tard’s offer – Not a good indication of Casey’s unaffected stock price – C-store peers are trading at a premium due to takeover rumors spurred by Couche-Tard’s offer – Casey’s stock trading is more correlated to the S&P Retail Index than it is to any other C-store company • Absent Couche-Tard’s offer, Casey’s stock would have traded down with other market indices “The stock [The Pantry] has potential upside, partly because it could be an attractive target for an acquirer in an industry that is likely to see lots of deals over the coming years” Barron’s 21 June, 2010 “It's one of the retail sectors that hasn't consolidated, relative to others that we cover” William Blair & Co. 21 June, 2010 “With the recent interest in Casey's General Stores, shares in The Pantry may be the next best thing.” Investopedia 22 June, 2010 “It's one of the retail sectors that hasn't consolidated, relative to others that we cover” William Blair & Co. 21 June, 2010 “We acknowledge Casey’s stock will likely drop once the tender offer is complete and if the Couche-Tard offer is withdrawn” BMO Capital Markets 20 August, 2010 $38.50 offer Implied Casey's as a% premium Index 4/8/10 9/1/10 % change share price (1) to implied price S&P 500 1,186 1,080 (8.9%) 28.76 33.8% S&P Retail Index 466 412 (11.7%) 27.89 38.1% S&P Small Cap 600 371 334 (9.8%) 28.50 35.1% Dow Jones Industrial Average 10,927 10,269 (6.0%) 29.69 29.7% Russell 3000 3,101 2,839 (8.5%) 28.92 33.1% NYSE Composite 7,565 6,911 (8.6%) 28.86 33.4% |
21 Casey’s equity research price targets • Couche-Tard’s all cash offer is a 26% premium to the average present value of Casey’s equity research analyst price targets prior to making our offer public • Subsequent to Couche-Tard’s offer, Casey’s equity research price targets increased • Couche-Tard’s all cash offer of $38.50 is above the average present value of Casey’s equity research analyst price targets of $37.43 • The revised target prices are based on assumptions that are inconsistent with observable data and widespread market views of the C-store industry • Constant P/E multiple post Casey’s leveraged recapitalization • Unusually high and unsustainable gasoline margins going forward • Equity research also cite many factors that may affect their target price including: • Gasoline margin volatility • Month-to-month volatility in merchandise comp sales • Lack of specific guidance on EPS Source: Bloomberg. (1) Price targets discounted back from 18 months after report day to 9/1/10 at a discount rate of 10%. Prior to 4/8/2010 After 4/8/2010 Present $38.50 offer as Present $38.50 offer as value a % premium / value a % premium / Report Target of target (discount) to Report Target of target (discount) to Firm date price price (1) implied price date price price (1) implied price BMO Capital Markets 4/6/2010 $30.00 $27.02 42.5% 8/23/2010 $39.00 $33.87 13.7% BAML 3/18/2010 33.00 29.87 28.9% 6/15/2010 39.00 34.50 11.6% Feltl & Company 3/12/2010 29.70 26.92 43.0% 7/28/2010 46.00 40.22 (4.3%) Sidoti & Company 3/12/2010 40.00 36.26 6.2% 8/31/2010 50.00 43.36 (11.2%) RBC 3/10/2010 36.00 32.65 17.9% 8/17/2010 44.00 38.27 0.6% Northcoast Research NA NA NA NA 7/13/2010 42.00 36.87 4.4% Morgan Keegan NA NA NA NA 8/17/2010 44.00 38.27 0.6% Miller Tabak NA NA NA NA 7/30/2010 39.00 34.08 13.0% Average $33.74 $30.54 26.0% $42.44 $37.43 2.9% Median 33.00 29.87 28.9% 42.00 37.57 2.5% |
22 Casey’s leveraged recapitalization does not increase value for its shareholders • Empirical evidence and academic studies contradict the fallacy that EPS accretion from stock buy backs leads to increased stock prices Rappaport. Ten Ways to Create Shareholder Value. 2006. Harvard Business Review Oded & Michel. Stock Repurchase and the EPS Enhancement Fallacy. 2008. Financial Analyst Journal |
23 Source: Bloomberg. Note: All P/E ratios are based on forward looking earnings estimates. Across the market, in the C-store industry and for Casey’s, P/E ratios have fluctuated significantly over time, showing that P/E ratios are volatile P/E ratios are volatile 5 10 15 20 5 10 15 20 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 5 10 15 20 2006 2007 2008 2009 2010 Historical P/E ratios Average: 13.4 Standard deviation: 1.4 Average: 15.9 Standard deviation: 2.1 Average: 15.1 Standard deviation: 1.6 |
24 In almost half of the cases, the P/E ratios of companies that have announced a share repurchase have decreased in the year following the announcement In almost half of all share repurchases announced, P/E ratios have decreased Performance of P/E ratios of companies that have announced a share repurchase, adjusted for market movements over the year following the announcement 25 50 75 100 125 150 175 0% 25% 50% 75% 100% 75 percentile 25 h percentile Median Announcement Announcement +365 days +365 days Source: Bloomberg. Note: Based on all share repurchase announcements. P/E ratios calculated as share price divided by forward looking EPS. Share price appreciation calculated as excess returns to the S&P 500 on a beta adjusted basis. |
25 Over the last three and five years, EPS growth has been a very limited driver of total share price returns, explaining between 0% and 2% of all S&P 1500 company returns Source: Bloomberg. Note: Sample includes non-financial S&P 1500 firms. Total returns calculated as share price appreciation over the last three and five years with dividends reinvested respectively. Very weak relationship between EPS growth and TSR EPS profile is only one factor in TSR -40% -30% -20% -10% 0% 10% 20% 30% 40% -300% -150% 0% 150% 300% EPS growth -40% -30% -20% -10% 0% 10% 20% 30% 40% -300% -150% 0% 150% 300% EPS growth What about over the last 5 years? How much has EPS growth explained total returns over the last 3 years? |
26 3. Casey’s Board must be replaced |
27 Casey’s Board seems to be more interested in preserving their jobs than serving shareholders’ best interests Refuse to engage in dialogue Entrenched Board and management Leveraged recapitalization • Casey’s has rejected all of Couche-Tard’s offers • Casey’s continues to refuse to meet or negotiate with Couche-Tard • Casey’s executives have been granted lucrative golden parachutes • Adopted a Poison Pill and commenced costly and meritless litigation against Couche-Tard (they have dropped most claims) • Installed coercive financing with a very costly “poison put” mechanism designed to impede any takeover attempt by any party • Casey’s Board and management only own 0.3% of Casey’s – their financial interest is in their jobs and is not aligned with shareholders’ interest • One of several last ditch attempts to distract shareholders from Couche-Tard’s all-cash premium offer for the entire company • A calculated move to financially engineer a temporary increase in Casey’s stock price • Fails to increase fundamental value for all Casey’s shareholders |
28 Casey’s coercive, entrenching financing demonstrates that Casey’s Board must be replaced Casey’s leveraged recapitalization is a pretext for installing a coercive financing arrangement with a very costly “poison put” mechanism designed to impede ANY takeover attempt by ANY party • Casey’s executed an off-market debt financing with a financing arrangement which includes a “poison put” mechanism designed to impede any takeover attempt • Coerces shareholders not to vote against Casey’s incumbent Board • Payable in the event, among other things: – Casey's shareholders decide to replace a majority of Casey’s Board – Couche-Tard or any other party acquires 35% or more of the outstanding shares of Casey’s • One voting advisory service has stated that “linking a payment of this size to a change-in- control trigger is highly unusual and is designed to entrench Casey’s Board and management at the expense of Casey’s shareholders” – In poison puts installed by other companies, these change in control provisions had some “cure” available even if a dissident or hostile bidder triggered the poison put; however, Casey’s poison put does not have a “cure” – Casey’s poison put was adopted in the context of an active hostile tender offer, making the entrenchment power of the poison put a central issue for shareholders – Effectively attempts to take the decision regarding the future of Casey’s away from Casey’s shareholders If the buyback is such a great idea, why didn’t Casey’s do it before Couche-Tard’s offer? |
29 Casey’s Board is misinforming shareholders about the true cost of its coercive financing • If enforceable, Casey’s “poison put” mechanism transfers substantial value from Casey’s shareholders to Casey’s noteholders – Makes it approximately $100 million more expensive to acquire Casey’s (based on current treasury rates) – Equates to ~$2.65 per share (after giving effect to Casey’s recapitalization) – 18% premium to Casey’s noteholders, which represents ~ 7% of Casey’s current equity value (pro forma for the self tender) based on current stock prices – Total annualized return to noteholders of 58% if put at 12/31/10 based on current treasury rates – Detracts from the value that may be received by Casey’s shareholders – Deters any acquisition, not just by Couche-Tard |
30 Interest rate of 4.3% (LIBOR+300 bps) (1) May be prepaid at any time without penalty Pro forma leverage: 3.1x total debt / LTM EBITDA – Couche-Tard is rated BB+ Couche-Tard obtained favorable financing while Casey’s financing is off-market 5.22% interest rate Costly and unusual “poison put” mechanism designed to impede any takeover attempt by any party Pro forma leverage: 2.5x total debt / LTM EBITDA – Casey’s is not publicly rated Casey’s financing Couche-Tard’s financing (1) Includes a 4-year LIBOR Swap Spread (i.e. to convert floating rate to fixed rate, so comparable to Casey’s financing) of 1.3% as of 9/1/2010 per Bloomberg. • Couche-Tard’s financing proves that Casey's could have financed its self-tender much more cost effectively and avoided the coercive and expensive "poison put" it gave to its new lenders – Typically, debt financing used by companies like Casey's has a maximum change of control premium in the 1% to 3% range – Multiple forms of cheaper debt financing were available to Casey’s to fund its self-tender |
31 Selected retail financings • Casey's new $569 million notes do not have publicly available ratings • Assuming a credit rating of BBB or strong BB (low investment grade or strong high yield), Casey's new notes issue appears to be off-market • Relative to investment grade notes issues, the yield is almost 100 bps wide to the two new notes issues of 2010 • Compared to strong HY issues, Casey's notes maintain only a slight pricing advantage • We would have expected the "poison put" feature to drive substantially improved pricing given the "windfall" opportunity to investors • If enforceable, the "poison put" gives noteholders a total annualized return of 58% if put at 12/31/10 based on current treasury rates Casey’s new notes issue appears to be “off-market” Note: Includes 2010 issuance of strong BB and BBB area issuers. Selected retail debt offerings USD Current Date Issuer Coupon Maturity Proceeds Yield High Yield (Strong BB area) 5/18/2010 J. C. Penney 5.650% 6/1/2020 398.9 5.650% 4/26/2010 Advance Auto Parts 5.750% 5/1/2020 298.8 5.750% Average 5.700% Investment Grade (BBB area) 8/24/2010 Yum Brands, Inc. 3.875% 1/1/2020 $350.0 4.060% 4/20/2010 Nordstrom, Inc. 4.750% 5/1/2020 500.0 4.110% Average 4.085% 8/10/2020 Casey's 5.220% 8/9/2020 $569.0 |
32 4. Responses to Casey’s misinformation campaign |
33 Casey’s Board is misinforming shareholders about Couche-Tard’s offer Casey’s claims that Couche-Tard’s offer substantially undervalues Casey’s and represents a low premium relative to precedent transactions Our offer is at a premium multiple and provides a unique opportunity for Casey’s shareholders to realize full and immediate value – 7.5x EV / FY2010 EBITDA is above the average multiple of 6.3x for precedent C-store transactions – $1.3 million EV per store is above the average multiple of $662 thousand for precedent C-store transactions – 32% premium to Casey’s pre-announcement 1-year average share price – 22% premium to Casey’s pre-announcement share price – 17% premium to pre-announcement all-time and 52-week high share price – Prior to Couche-Tard’s offer, Casey’s shares have never traded above $32.83 per share |
34 Casey’s Board is misinforming shareholders about Couche-Tard’s offer (cont’d) Casey’s states in their presentations that they “expect the favorable gasoline environment to continue” – Why? They don’t say… Number of gasoline outlets and “hoses” has held steady or grown – Particularly true in the Midwest, where readily available and inexpensive land results in low barriers to entry Demand for finished motor gasoline has declined over the past five years – Across the U.S., 275.5 million monthly barrels were supplied as of June 2010, compared to 281.2 million monthly barrels during the prior five years – This trend is more pronounced in the Midwest, where 78.8 million monthly barrels were supplied as of June 2010, compared to 82.9 million monthly barrels during the prior five years Recent industry retail gasoline margins are unsustainably high and have benefited from: – A slow and steady decline in underlying crude prices from their peak of $145 in July 2008 to $72 currently – Retail prices are sticky and do not decline immediately even when crude prices decline. Accordingly, recent retail margins have been inflated – Hurricane activity in the Gulf during recent years has led to actual supply disruptions, which resulted in spikes in retail margins 11.31¢ 9.32¢ 11.00¢ 10.20¢ 10.78¢ 11.47¢ 10.40¢ 13.90¢ 12.87¢ 13.90¢ FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 Source : Casey's public filings. Casey’s gasoline margin per gallon |
Casey’s Board is misinforming shareholders about Couche-Tard’s offer (cont’d) Casey’s claims that Couche-Tard’s offer does not reflect recent sector performance - Casey’s is misinforming shareholders by comparing recent share price performance to that of Couche-Tard, Susser and The Pantry Casey’s is more correlated to the S&P Retail Index than it is to any other C-store company Recent C-store sector performance has been affected by Couche-Tard’s offer – The Pantry and Susser are rumored to be takeover targets – Casey’s current stock price reflects Couche-Tard’s offer and not the unaffected stock price Since Couche-Tard made public its offer to acquire Casey’s on April 8, 2010, the S&P 500 Index and S&P Retail Index (1) have declined 9% and 12%, respectively – Implied share price for Casey’s of $28.76 and $27.89, respectively (2) – We firmly believe that absent our offer, Casey’s stock price would have traded in line with the declining trend Prior to Couche-Tard’s offer, Casey’s shares have never traded above $32.83 per share Note: As of September 1, 2010. (1) The S&P Retail Index is a capitalization-weighted index of 29 domestic equities in the retail sector, traded on the New York Stock Exchange, American Stock Exchange and NASDAQ. (2) Implied Casey’s share price based on relative change in price vs. pre-announcement price of $31.59. Source: FactSet Research Systems. Note: Correlation in periods ending April 8, 2010. Statistical correlation (R²) with Casey's 10 year 5 year 3 year 2 year 1 year S&P Retail Index 18.4% 26.7% 31.1% 31.3% 28.5% S&P 500 25.6% 30.6% 35.4% 34.4% 30.2% Couche-Tard 1.1% 1.8% 2.3% 1.9% 2.2% Pantry 7.8% 18.1% 21.2% 24.0% 17.9% Susser NA NA 15.3% 18.3% 10.7% 35 |
36 Casey’s Board is misinforming shareholders about Couche-Tard’s offer (cont’d) Casey’s claims that Couche-Tard’s offer is opportunistic and intends to take advantage of equity market volatility Casey’s had since October of 2009 to seek alternatives – No other firm offer to buy the company has appeared Casey’s stock would have declined in line with the various indices, but for Couche-Tard’s offer supporting it Our offer is the most attractive strategic alternative available to Casey’s shareholders – Opportunity to realize full and fair value for their shares Our offer permits shareholders to receive certain profit, avoid risk of a double-dip recession and receive cash for a volatile equity We are not undervaluing Casey’s or being opportunistic Casey’s notes “extraordinary equity market volatility” yet asks its shareholders to stand pat “as the economy recovers” 53% of Casey’s shareholders were sellers at $38.00 per share |
37 Casey’s Board is misinforming shareholders about Couche-Tard’s offer (cont’d) Casey’s claims Couche-Tard’s offer would adversely impact Casey’s other constituencies Couche-Tard’s offer is very attractive for ALL of Casey’s constituencies Couche-Tard’s track record with employees of companies and with local businesses around the companies we have acquired is outstanding – Couche-Tard operates using a highly decentralized model, and we expect to keep most, if not all, of the employees of Casey’s in place – Our decentralized model has enabled us to continue the relationships with existing suppliers and vendors – In the case of Casey’s, we already have significant overlap in vendors and do not expect any material changes in operations Greater scale of a combined Couche-Tard and Casey’s will provide the other constituencies of Casey’s with opportunities beyond what the smaller platform of Casey’s currently can provide – Access to Couche-Tard’s platform will provide the suppliers of Casey’s with increased opportunities to expand their sales to convenience store chains within Couche-Tard’s portfolio Employees looking to rise in the organization will have greater opportunities – Brian Hannasch of Iowa, our COO, joined Couche-Tard through an acquisition – Most of Couche-Tard’s operating vice presidents are from acquisitions |
38 Casey’s Board is misinforming shareholders about Couche-Tard’s offer (cont’d) Casey’s claims its performance, growth opportunities, balance sheet and human capital can create far greater value for shareholders Casey’s leveraged recapitalization implies they do not have good opportunities to invest and grow the company independently – Putting leverage on the company limits flexibility and ability to deploy capital for growth – Why didn’t they implement a recapitalization plan before Couche-Tard’s offer? – Casey’s management has historically operated without leverage – how will operating with leverage affect Casey’s management decisions going forward? Casey’s claims Couche-Tard’s offer is an attempt to utilize Casey’s strong balance sheet and real estate position to subsidize the offer Our offer fully values Casey’s owned real estate – Minimal intrinsic real estate value (small, rural, limited alternative uses and very little available for sale-leaseback) We believe that no other buyer will pay a higher price for Casey’s than the Couche-Tard offer |
39 Next steps for shareholders Vote FOR Couche-Tard’s nominees and proposal on the BLUE proxy card • Elect the new slate of independent candidates for the Board of Directors, who are committed to maximizing value for all Casey’s shareholders • Vote FOR Couche-Tard’s proposal regarding new or amended By-Laws |
40 Appendix |
41 A. Couche-Tard Nominees and Biographies |
42 Independent Nominees – Biographical Information Name Age Qualification details Howard W. Bates 56 Mr. Bates currently is self-employed as a business consultant and is actively engaged in raising capital for early stage growth and new venture start-ups. From 2007 to 2009, Mr. Bates served as President of Kratos Defense and Security Solutions, Inc. In 1994, Mr. Bates founded Haverstick Consulting, Inc., a defense and technology firm in Indianapolis, Indiana, which was acquired by Kratos Defense and Security Solutions, Inc. in December 2007. From 1994 to 2007, Mr. Bates served as the President and Chief Executive Officer of Haverstick Consulting, Inc. Mr. Bates serves or has served on the board of directors of the following organizations: Haverstick Consulting, Inc.; Haverstick Government Solutions, Inc., a government consulting firm; DTI and Associates, a military and government consulting firm; Xtreme Alternative Defense Systems (XADS) Ltd.; Haverstick Acquisition Inc.; Rocket Support Systems LLC; and A.C.E., a charitable foundation for children. Mr. Bates earned a Masters in Business Administration from Xavier University in Cincinnati. |
43 Independent Nominees – Biographical Information Name Age Qualification details Hugh L. Cooley 60 Mr. Cooley retired from Shell Oil Products Company in July 2009. In 37 years with Shell Oil Products Company, Mr. Cooley held various positions, including, among others, Vice President of Marketing and Sales for Motiva Enterprises LLC, a joint venture between Shell Oil Company and Saudi Refining, Inc., and Vice President for National Wholesale of Shell Oil Products Company. Mr. Cooley serves or has served on the board of directors of the following organizations: truenorth Energy, LLC, a joint venture between the Lyden Company and Shell Oil Company which operates or supplies Shell franchise sites; First Coast Energy, LLP, a gasoline service station company; and Tri Star Energy, LLC, which is a joint venture of Kimbro Oil Company, The Parman Corporation and Motiva Enterprises LLC and distributes fuel to, and operates convenience stores under, the Daily’s Convenience Stores and Scot Markets brands in Tennessee and Kentucky. Mr. Cooley earned a Bachelor of Science in Marketing from the University of Alabama. |
44 Independent Nominees – Biographical Information Name Age Qualification details Terrence Coriden 63 Since 1998, Mr. Coriden has served as an attorney for, and part owner of, Coriden, Coriden, Andrews & Glover, LLC (formerly Coriden Law Office, LLC). Mr. Coriden is also currently Of-Counsel for Dugan & Voland, LLP and serves as City of Columbus Utility Attorney. From 2005 to 2006, Mr. Coriden served as a hearing judge for the State of Indiana regarding the adjudication of worker compensation matters. Since 2005, Mr. Coriden has served as an adjunct professor at Indiana University-Purdue University Indianapolis. Mr. Coriden currently serves on the board of directors of Kid’s Chance Foundation and has served on the board of directors of the Indiana Continuing Legal Education Forum and as Chairman of the Workers Compensation Board of Indiana. Mr. Coriden is a member of the Indiana State Bar Association and received his Juris Doctor degree from the University of Toledo. |
45 Independent Nominees – Biographical Information Name Age Qualification details Mickey Kim 51 As of 2005, Mr. Kim was the Chief Operating Officer and Chief Compliance Officer of Kirr, Marbach & Company, LLC, a registered investment adviser, and continues to currently hold such positions. Mr. Kim is a director and serves on the audit committee of Kirr, Marbach Partners Funds, Inc., which is a registered investment company. In addition, Mr. Kim serves on the board of directors of Heritage Fund – The Community Foundation of Bartholomew County, a community philanthropic organization. Mr. Kim served on the board of directors of Salin Bank & Trust Co., a privately held Indiana bank. Mr. Kim is a Chartered Financial Analyst. Mr. Kim earned a Bachelor of Science in Accounting from the University of Illinois and a Masters in Business Administration in Finance from the University of Chicago. |
46 Independent Nominees – Biographical Information Name Age Qualification details David O. Mann 41 Since 2002, Mr. Mann has served as a partner of Spring Mill Venture Partners, LLC, a venture capital firm focused on early stage, high-growth life science and information technology investments. Previously, Mr. Mann worked with ServiceMaster Ventures and was a founding member of the ServiceMaster Home Service Center, a joint venture between Kleiner Perkins Caufield & Byers and ServiceMaster Ventures. Mr. Mann began his career in the U.S. Navy. He serves or has served on the board of directors of the following organizations: HVAF of Indiana, Inc., an organization that supports homeless veterans; BioStorage Technologies, Inc., a company that supplies storage for biological products; Cine-tal Systems, Inc., a television display technology company; WebLink International, Inc., a webmanagement software and service company; KIPP Indianapolis College Preparatory, a college preparatory school in Indianapolis, Indiana; Venture Club of Indiana, a non-profit organization that assists entrepreneurs; and TechPoint PAC, a non-profit organization and political action committee. Currently, an adjunct faculty member at Indiana University Kelley School of Business (Indianapolis), Mr. Mann received his Masters in Business Administration from Harvard Business School and a Bachelor of Science from the U.S. Naval Academy at Annapolis. |
47 Independent Nominees – Biographical Information Name Age Qualification details Kevin J. Martin 44 Since 2001, Mr. Martin has served as the Chief Financial Officer of Johnson Ventures, Inc., a private investment company. Mr. Martin serves on the board of directors of the following organizations: JV Partners I, LLC; Indiana Limestone Company, Inc., a quarrying and fabrication company; Stone Center of Indiana, LLC, a retailer of architectural and landscape stone; Indianapolis Tennis Championships, Inc., a non-profit organization that hosts tennis tournaments; and the Columbus Museum of Art & Design, a non-profit organization dedicated to arts in Columbus, Indiana. Mr. Martin previously served on the board of directors of Johnson Construction Materials, LLC, a construction material provider and Central Restaurant Products, LLC, a wholesale restaurant equipment and supplies company. Mr. Martin received a Bachelor of Science in Accounting and a Masters in Business Administration in Management Information Systems and Entrepreneurship from Indiana University. |
48 Independent Nominees – Biographical Information Name Age Qualification details David B. McKinney 55 Since 1998, Mr. McKinney has served as President and Chief Compliance Officer of Reams Asset Management Company, an investment management firm. From 2003 to 2005, Mr. McKinney served on the board of directors of Columbus Funds, Inc., a registered investment company. In addition, Mr. McKinney serves or has served on the board of directors of the following organizations: the United Way of Bartholomew County; Turning Point Domestic Violence Services, an organization devoted to domestic violence; Volunteers in Medicine, an organization that provides health care services utilizing retired healthcare professionals; Columbus Indiana Architectural Archives; Columbus Enterprise Development Center and Big Brothers / Big Sisters of Bartholomew County. Mr. McKinney is a Certified Public Accountant and received a Bachelor of Science in Accounting from Miami University and a Juris Doctor from Indiana University School of Law. |
49 Independent Nominees – Biographical Information Name Age Qualification details Marc E. Rothbart 47 Since 1999, Mr. Rothbart has served as Chief Financial Officer and Senior Vice President of SIHO Insurance Services, Inc., an employee health care benefits company. Mr. Rothbart serves on the board of directors of the following organizations: the Columbus Indiana Philharmonic; the United Way of Bartholomew County; and the Columbus Museum of Art and Design. Mr. Rothbart also has served on the board of directors of Art Columbus and the Child Abuse Prevention Council. Mr. Rothbart earned a Bachelor of Science in Management from Bentley College. |
50 Who is Alimentation Couche-Tard? |
51 History of Couche-Tard IPO 34 Store Network 3rd Public Offering Acquired 245 Provi-Soir Stores and 50 Wink’s Stores Alain Bouchard Started the Chain with one store 2nd Public Offering 304 Store Network Entry into Ontario, Western Canada 976 Stores under Mac’s, Mike’s Mart and Becker’s Banners as part of Silcorp Acquisition Added to U.S. Midwest 287 Dairy Mart Stores 4th Public Offering Entry into U.S. Midwest 225 Bigfoot Stores as part of Johnson Oil Acquisition - Further Penetration of U.S. Midwest 92 Dairy Mart 43 Clark Retail Stores - Acquired Dunkin’ Donuts Quebec Master Franchise - Acquired Circle K, 2nd largest independent convenience store in U.S. Franchise agreement with Grupo Kaltex, S.A. de C.V. for 250 stores in Mexico within the next five years Acquisition of 236 sites from Shell Oil Products US and its affiliate Motiva Enterprises LLC Couche-Tard and Irving Oil Limited expand partnership to include 252 stores across Atlantic Canada and New England Couche-Tard offers to acquire Casey’s at $38.50 per share Added a total of 496 stores Acquisition of 43 company- operated and 444 franchises from Exxon Mobil |
52 2.3x 1.4x 0.8x 0.4x 1.5x 1.3x 1.0x 0.6x At Circle K transaction close 2004 2005 2006 2007 2008 2009 2010 Couche-Tard rapidly de-leveraged following its successful acquisition of Circle K Total net debt / EBITDA Recent acquisitions Note: 2004 figures are pro forma for Circle K transaction. (1) Represents 50% interest in RDK Ventures LLC, a joint venture with Shell Oil Products US (100 stores). Couche-Tard already operated 32 of these stores prior to entering into the JV. Adjusted net debt / EBITDAR 3.7x 2.9x 2.5x 3.2x 3.2x 2.9x 2.6x 4.2x Longstanding history of successful acquisitions and de-leveraging FYE April 2004 FYE April 2005 FYE April 2006 FYE April 2007 FYE April 2008 FYE April 2009 FYE April 2010 |
53 Couche-Tard has a large presence in the U.S. • 3,836 stores in the U.S. – 65% of total stores • Presence in 43 states and Washington D.C. • 8 out of 11 divisions in the U.S. • 36,000 employees out of 53,000 are in the U.S. – 68% of total • 78% of revenues come from U.S. divisions US 100% US 78% Canada 22% US 83% Canada 17% Couche-Tard Casey’s Pro-forma Couche-Tard Note: Based on FY2010 sales as of April 2010. + = |
54 The Strategic Rationale |
55 Compelling strategic rationale • Creates largest independent corporate-store operator in North America with ~ 7,400 locations • Expands geographic footprint across North America • Enhances scale and efficiency • Uniquely positions Couche-Tard to generate more cash flow • Delivers immediate premium to Casey’s shareholders • Casey’s stakeholders become part of bigger organization with benefits of a decentralized business model empowering its employees |
56 1,000 5,932 4,401 777 383 1,387 1,649 1,598 1,531 900 386 527 7,100 1,468 4,596 3,367 3,601 428 1,302 498 8,100 7,400 5,869 4,639 4,144 3,984 1,815 1,649 1,598 1,531 1,305 900 884 527 43 3 1,468 7-Eleven Pro forma Couche-Tard Couche-Tard Shell ExxonMobil Chevron Valero Pantry Marathon Casey's ConocoPhillips Cumberland Farms Tesoro Susser Company-operated Affiliated / Franchises Source: Public filings / data, websites, press releases. Note: Most recent data as of July 18, 2010. (1) Denotes U.S. locations. (1) (1) (1) (1) Creates the largest independent corporate-store operator in North America |
57 Enhanced store network International Locations: China, Guam, Hong Kong, Indonesia, Japan, Macao, Mexico, Vietnam Company operated: 4,401 Affiliated: 1,468 Total stores: 5,869 Owned real estate: 1,300+ locations Source: Company information. Casey’s portfolio is geographically complementary to Couche-Tard Total stores: 1,531 IL IA MN MO NE ND SD WI IN 65 377 436 97 296 109 104 10 Casey’s retail footprint Couche-Tard’s retail footprint GREAT LAKES REGION Corporate stores: 463 Affiliated stores: 250 MIDWEST REGION Corporate stores: 425 Affiliated stores: 65 SOUTHEAST REGION Corporate stores: 271 Affiliated stores: 56 SOUTHWEST REGION Corporate stores: 222 Affiliated stores: 200 ARIZONA REGION Corporate stores: 624 Affiliated stores: 18 WEST COAST REGION Corporate stores: 162 Affiliated stores: 321 CENTRAL CANADA Corporate stores: 571 Affiliated stores: 199 WESTERN CANADA Corporate stores: 287 Affiliated stores: 0 EASTERN CANADA Corporate stores: 676 Affiliated stores: 300 FLORIDA REGION Corporate stores: 407 Affiliated stores: 6 GULF REGION Corporate stores: 293 Affiliated stores: 53 37 |
58 Integration strategy Couche-Tard expects that: • Couche-Tard’s decentralized business model will allow it to run Casey’s as a stand-alone business unit • No significant capital expenditures will be required to integrate Casey’s • Casey’s store banner will remain in place (no re-branding / remodels required) and will continue to be grown as a rural store format in the U.S. Midwest region • There is a possibility to leverage Casey’s wholesale and distribution capabilities • There is a possibility to implement best practices from Casey’s and Couche-Tard • Limited potential synergies – Casey’s is not a turn-around story; currently a well operated business |
59 S&P Retail Index constituents ($ in billions) Ticker Company Name Market Capitalization as of Sep. 1, 2010 AZO AutoZone $10.2 BBBY Bed Bath & Beyond 9.8 BBY Best Buy 13.7 BIG Big Lots 2.6 COST Costco Wholesale 25.5 CVS CVS Caremark 37.9 DDS Dillard's 1.5 DG Dollar General 9.6 FDO Family Dollar Stores 5.8 GPS Gap 11.2 HD Home Depot 48.2 JCP J.C. Penney 4.9 JWN Nordstrom 6.6 KR Kroger 12.8 KSS Kohl's 14.9 LOW Lowe's 30.2 LTD Limited Brands 8.1 ODP Office Depot 1.0 RSH RadioShack 2.4 S Sprint Nextel 12.3 SHW Sherwin-Williams 7.7 SPLS Staples 13.5 SWY Safeway 7.3 TGT Target 37.7 TIF Tiffany 5.2 TJX TJX 16.4 WAG Walgreen 26.9 WINN Winn-Dixie Stores 0.4 WMT Wal-Mart Stores 187.1 Source: FactSet Research Systems. |