TORONTO Casey's General Stores Inc (CASY.O) rejected a $43-a-share offer by 7-Eleven and ended talks with the convenience store operator owned by Japan's Seven & I Holdings (3382.T), two months after a second rejected suitor walked away.
Shares of Casey's dropped nearly 8 percent on the Nasdaq before recovering slightly, but still finished 5 percent lower.
Casey's, which operates over 1,500 stores in the U.S. Midwest, said 7-Eleven's revised offer did not reflect its full value and growth opportunities.
"It seemed to me that the bid-ask between what Casey's wanted and what the buyers were willing to pay seemed to be fairly wide," said Miller Tabak & Co analyst Michael Broudo, adding that Casey's had likely sought a bid in the high $40s.
7-Eleven said in a statement on Wednesday that it believed its revised offer fairly valued Casey's.
In early September, the Japanese-owned convenience store behemoth made a late, non-binding offer to buy Casey's for $2.03 billion, or $40 a share, trumping Canada's Alimentation Couche-Tard's (ATDb.TO) final offer of $38.50 a share.
Couche-Tard, which operates over 5,800 stores, abandoned its hostile takeover bid for Casey's on September 30, nearly half a year after it made its initial offer, after being repeatedly rebuffed by Casey's.
Montreal-based Couche-Tard, which could not be immediately reached for comment, could eventually step in with a new bid, should Casey's shares remain under pressure, analysts said.
Iowa, where Casey's is incorporated, could make any future takeover attempts difficult, however, due to state laws that favor the takeover target company.
"Casey's behavior throughout the Couche-Tard and subsequent 7-Eleven bid process made it pretty clear the company wasn't for sale at any price and today's announcement comes as no surprise," wrote Jim Durran, an analyst with National Bank Financial, in a research note.
"The rejection of the $43 offer will probably be a tough pill for a lot of Casey's shareholders to swallow and will increase doubt about how shareholder focused Casey's Board and management are," he added.
CONVENIENCE STORE CHAINS EXPAND
Much of the U.S. convenience store market is made up of independent owners and smaller chains, but the major players have been jockeying to expand.
Couche-Tard, which owns the Circle K chain in the United States, has made no secret that it wants to extend its reach south of the border.
7-Eleven, which operates, franchises or license over 8,200 stores in North America and about 39,000 stores worldwide, said on Wednesday it was pushing ahead with other growth plans and expected to add over 300 stores this year in the United States and Canada.
Casey's also said on Wednesday it would buy up to 44 Kabredlo's convenience store locations to expand its presence in Nebraska, Kansas and Oklahoma, and convert the outlets to Casey's General Stores.
The deal will likely add to earnings in the first year of operation, it said. For the year ended June 30, these stores generated annual revenue of about $52 million and sold about 36 million gallons of fuel.
Casey's shares closed down $2.11, or 5.1 percent, at $39.34 on the Nasdaq.)
(Additional reporting by Isheeta Sanghi in Bangalore; Editing by Frank McGurty)