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Casey's (CASY) to Acquire Buchanan Energy for $580 Million

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Zacks Equity Research
·4 min read
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Casey's General Stores, Inc. CASY is keen on adopting measures that enable long-term growth and boost value for shareholders. To enhance market presence, this well-known convenience store retailer announced an agreement to acquire Buchanan Energy.

By acquiring Buchanan Energy, which is known for its Bucky’s Convenience Stores, Casey's will be able to expand its presence across key Midwest markets.

The transaction, which is worth $580 million, is expected to be completed by the end of this year, subject to customary approvals. Net after-tax purchase price of the transaction is at $500 million. Casey’s will fund the deal through a combination of cash in hand, revolver capacity as well as bank financing. The company anticipates achieving $23 million in annual synergies by the third year of the acquisition.

We note that shares of Casey’s surged 7.4% during the trading session on Nov 9. Notably, this Zacks Rank #3 (Hold) company’s shares have increased 11% in the past three months, against the industry’s decline of 5.2%.

 

Buchanan is a Worthwhile Addition

Buchanan’s convenience stores are mainly located across Illinois and Nebraska. The deal will lead to the addition of 94 retail stores and 79 dealer locations to Casey's business. The company will also be able to procure Buchanan’s multiple real estate parcels for future new store construction. As a result of this acquisition, Casey’s store footprint will reach more than 2300.

The transaction also includes a dealer network of stores, which will enable Casey’s to manage fuel-supply agreements. This will boost the company’s flexibility in terms of future mergers and acquisitions as well as provide a new income stream, while leveraging its scale in procuring fuel.

Casey’s move to acquire Buchanan fits well with the company’s strategic vision to augment its store portfolio. The move will enable the company to explore more growth opportunities in the Midwestern markets. Moreover, management expects that the deal will create compelling near- and long-term value for Casey’s shareholders and will be quickly accretive to the company’s profits.

Growth Efforts are on Track    

We note that Casey’s is on track with enhancing store fleet. During the first quarter of fiscal 2021, the company constructed nine new stores and closed two. The company currently operates more than 2,200 convenience stores in 16 states.

Additionally, the company is undertaking prudent measures to enhance consumers’ shopping experience. It is on track with enhancing digital capabilities, which includes measures undertaken to enhance online ordering capabilities as well as features in mobile application. It is also on track to augment delivery capabilities such as curbside pickup option.

We expect such prudent measures to continue yielding and thereby aid Casey’s to maintain strong footing in the retail convenience stores space.

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