US convenience store operator Casey's General Stores Inc (Casey's) yesterday turned down a hostile takeover bid by Canadian rival Alimentation Couche-Tard Inc (Couche-Tard) on the grounds that the proposal significantly undervalues the company and is not in the best interests of its shareholders.

Last month, Couche-Tard had submitted an all-cash offer to acquire Casey's for $36 a share, valuing the store chain at approximately $1.8 billion. The offer represents a 14-per cent premium over the closing price of $31.59 for Casey's shares on Thursday on Nasdaq.

On Friday's trades, shares in Casey's surged 24 per cent to close at $39.10.

Through a public communication sent to Alain Bouchard, president and CEO of Couche-Tard, Casey's president and CEO Robert Myres said that Couche-Tard's proposal is opportunistic and attempts to capture the significant long-term value of Casey's that rightly belongs to its shareholders.

Further, Myres pointed out that Couche-Tard's proposed 14 per cent premium over Casey's closing stock price Thursday, underscores that it is attempting to acquire US companies on the cheap.

''Casey's has navigated the downturn successfully and is extremely well positioned to benefit as the economic recovery continues,'' Myres said.

According to some analysts, Casey's could fetch a value of minimum $40 a share considering the store's growth plans and future earnings potential as well as its clean balance sheet.

Iowa-based Casey's along with its subsidiaries operate over 1,500 convenience stores under the names Casey's General Store, HandiMart and Just Diesel in nine Midwestern states in the US primarily Iowa, Missouri and Illinois.

The products offered through the stores include grocery and other merchandise, food and beverages, and gasoline. The company employs around 19,000 people.

For the third quarter that ended on 31 January, the store reported revenue of $1.1 billion, up 31 per cent compared to the same period last year and net earnings of $17.2 million, 23 per cent higher than a year ago.

Myres said that the company is continuing to focus on utilising its strong balance sheet, which includes approximately $153 million in cash, to expand its footprint through new store openings and strategic acquisitions.

Goldman, Sachs & Co is acting as financial advisor to Casey's on the proposal.

Quebec-based Couche-Tard operates around 5,880 convenience stores in Canada and the US employing over 53,000 people. Around 4,140 of the stores offer gasoline also in addition to other merchandise. In Canada, it operates under the names Couche-Tard and Mac's and Beckers and in the US as Circle K.

Couche-Tard's acquisitions last year include ExxonMobil's On the Run convenience stores in the US and several company-operated sites in Arizona. Earlier this year, Couche-Tard said that it would acquire Accel Marketing LLC's eight stores in North Carolina.