(Corrects timing of buyback announcement to July from April in13th paragraph)

By Pav Jordan

TORONTO(Reuters) - Casey's General Stores, the U.S. Midwest convenience-store chain fending offa takeover bid from Canada's Alimentation Couche-Tard Inc, said on Tuesday it has received a rival,$2.1 billion proposal, sending its share price soaring.

Casey's said a "strategic third party" offered the company$40 per share in cash, or 3.9 percent more than the $38.50offered by Couche-Tard on Sept. 1.

Investors drove Casey's stock up 9.3 percent to $42.49,optimistic that the price could go even higher.

Casey's said the new offer, which compares withCouche-Tard's $2 billion proposal, was still too little to seala deal but enough for it to engage in talks with the thirdparty, which it did not identify.

"While the board firmly believes that Casey's valuesubstantially exceeds $40 per share, it has authorizeddiscussions with the third party to explore whether atransaction can be reached that reflects Casey's true value andis in the best interests of Casey's, its shareholders and otherconstituencies," Casey's said in a statement.

The offer comes two weeks before a Sept. 23 shareholdervote to elect directors to Casey's board. Couche-Tard, whichoperates more than 5,800 stores in North America, has nominatedits own slate of candidates as it tries to sway investors toits bid.

Couche-Tard said in a statement the non-binding proposalwas an attempt by Casey's to artificially inflate its stockprice leading up to the vote.

Couche-Tard, Canada's largest convenience store operator,has grown steadily over the years through acquisitions and apush to expand in the United States.

The Montreal-based company is looking for more U.S. dealsand wants another along the lines of its $804 million purchaseof the Circle K chain in 2003.

Casey's, which operates more than 1,500 stores in theUnited States, said on Tuesday its board has unanimouslyrecommended against the offer from Couche-Tard, which hassweetened its bid for Casey's twice.

"We believe both of these proposals substantiallyundervalue Casey's for a number of reasons," the U.S. companysaid. "Analysts see Casey's intrinsic value at $45 per share,without reflecting a takeover premium."

Couche-Tard first offered to buy Casey's in April,proposing a takeover at $36 a share, or $1.85 billion.

In July, Casey's announced a $500 million plan to buy back25 percent of its shares at $38 a share.

The recapitalization boosted the value of Casey's shares,and also implied a value for the company, bankers said.

"Casey's value proposition has dramatically increased sinceCouche-Tard launched its hostile offer in April through theexecution of our strategic initiatives and successfulrecapitalization, boosting Casey's ability to delivershareholder returns," the company said.

Alimentation Couche-Tard shares fell 1.46 percent toC$23.65 on the Toronto Stock Exchange in midafternoon trade onTuesday. ($1=$1.05 Canadian) (Reporting by Pav Jordan; Editing by Frank McGurty, PeterGalloway and Steve Orlofsky)