Under pressure from a group of activists including James Pappas, Casey's General Stores Inc. (CASY) has reportedly submitted a bid to buy Kroger Co.'s (KR) convenience store business, a move that has sent both grocers' share prices upward late Friday.
According to a report by CNBC, Pappas' investment fund, JCP Investment Management, in January urged Casey's, an Iowa-based convenience store chain, to explore strategic alternatives including a sale. The Kroger convenience stores are valued at $2 billion, the report said.
A purchase of Kroger's convenience store business could act as a poison pill on JCP Investment's campaign because a larger Casey's that is still integrating an acquisition would be much harder to sell. In 2010, Casey's successfully fended off a hostile bid from Alimentation Couche-Tard.
JCP Investment and BLR Partners as well as Joshua Schechter, together own $45 million of Casey's shares, according to the report. Schechter recently was involved in an activist campaign at CDI Corp. (CDI) and he cut his teeth in the early 2000s working at Warren Lichtenstein's activist fund Steel Partners.
The move comes after Kroger said in October it was looking at strategic alternatives for its more than 780 convenience stores. The company is reportedly working with Goldman, Sachs & CO. on the review. Kroger's shares dropped precipitously last year after Amazon.com (AMZN) agreed to buy Whole Foods in an industry transformative deal that emerged under pressure from another activist, Jana Partners' Barry Rosenstein.
Casey's shares spiked up to 3% to $127.73 a share on the news. Kroger shares, which have recovered somewhat after the Amazon-Whole Foods deal, were up 2% to $30.88 on the report.
Amazon is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio . Want to be alerted before Cramer buys or sells AMZN? Learn more now .
Editor's note: This article originally appeared on The Deal, our sister publication that offers sophisticated insight and analysis on all types of deals, from inception to integration. Click here for a free trial.