Feuding Continues In The Family Dollar Affair

December 5, 2014

As the acquisition of Family Dollar Moves closer to resolution, would-be acquirers Dollar Tree and Dollar General maintain widely differing views on the superiority of their respective offers and the opinion of federal regulators.

The latest developments in the ongoing Family Dollar affair occurred December 5 when Dollar Tree and Dollar General took shots at each other in sharply worded press releases that offered differing views on competition, competitive overlap and store divestiture scenarios.  Both companies said they have been actively involved in conversations with the Federal Trade Commission as a December 23 vote on the deal with Dollar Tree looms for Family Dollar shareholders.

"We believe that the FTC staff appreciates that Dollar Tree and Family Dollar are different retailers with complementary business models," according to a statement by Dollar Tree indicating a small number of stores would need to be divested to secure regulatory approval.  Conversely, Dollar Tree contends the FTC may require Dollar General to divest far in excess of the 1,500 stores Dollar General offered to divest in its tender offer for Family Dollar.

"Dollar Tree stores sell everything for $1 or less.  Our product mix is constantly changing and includes a balance of things the consumer needs and things the consumer wants such as seasonal items, party goods, and other discretionary products," Dollar Tree said in a statement.  "Our shopping experience is fun, fast, and friendly with surprising products engendering a thrill of the hunt atmosphere.  Family Dollar sells primarily branded consumable products at multiple price points up to $20 or more.  Their customers expect Family Dollar to carry the same assortment of products week in and week out."

Based on the view that Dollar Tree and Family Dollar are distinct competitors and therefore only a small number of divestures would be required, according to Dollar Tree, which said it would be in a position to complete the deal by February 2015.

Not so fast was the response from Dollar General shortly after Dollar Tree issued its statement.  Dollar General looks past its similarities with the Family Dollar business model to assert its chief rival is Walmart.

"Dollar General's documents and data tell a very different story from that contained in the press release issued today by Dollar Tree," the company said.  "Walmart, not Family Dollar, is the primary driver regarding Dollar General's strategic pricing decisions, and more than 90% of Dollar General's SKUs are nationally priced.  Dollar General is confident that its approach to strategic and pricing decisions is both correct and superior to that of Family Dollar and Dollar General has no intention of adopting a flawed strategy - either now or after an acquisition of Family Dollar - that it believes would impair its ability to compete with Walmart and lead to inferior financial performance."

The coming weeks promise even more drama in the merger saga.  Dollar General said it will continue to work with the FTC and expects to provide an update in sufficient time to allow Family Dollar shareholders to review information prior to the meeting scheduled for December 23.

Meanwhile, Dollar Tree continues to portray its rival's offer as a risky and uncertain proposal due to overlap issues.  As a result, Dollar General may spend many months advocating and negotiating with the FTC with significant uncertainty as to the outcome and its bid may ultimately fail because the scope of an unprecedented FTC-required divestiture would lead to an unacceptable loss of value, according to Dollar Tree.

Source: Retailing Today