Dollar General Outbids Dollar Tree For Family Dollar

August 18, 2014

Dollar General bid $78.50 for Family Dollar this morning in a $9.7 billion deal that exceeds the $74.50 a share Dollar Tree offered for Family Dollar on July 28.

The deal would create a small format powerhouse with nearly 20,000 stores in 46 states and sales of more than $28 billion.

"For Family Dollar shareholders, our proposal is financially superior to the current transaction agreement with Dollar Tree and would provide Family Dollar shareholders with a substantial premium and immediate liquidity for their shares," said Rick Dreiling, Dollar General's chairman and CEO.  "We look forward to expeditiously entering into constructive discussions with Family Dollar in order to sign a definitive merger agreement that provides enhanced value to Family Dollar shareholders and enables Dollar General to realize the benefits of this combination."

The $78.50 per share Dollar General offers represents a 29.4% premium over the $60.66 closing price of Family Dollar shares the day before Dollar Tree made its offer.  The deal Dollar Tree offered Family Dollar is valued at about $8.5 billion and involves Family Dollar shareholders receiving $59.60 in cash and $14.90 in equivalent Dollar Tree shares.  The offer has already been unanimously approved by the boards of both companies.

To get the deal done, Dollar General said it had done significant economic and antitrust analysis and was prepared to commit to divesting as many as 700 stores.  The company also committed to paying the $305 million termination fee Family Dollar will owe Dollar Tree if the previously announced deal falls through.  In addition, Dollar General CEO Dreiling said he would remain in his current role to oversee integration of the companies after previously indicating he would retire in 2015.

Dollar General and Family Dollar operate complementary business - similar size stores with similar product assortments - which is expected to result in operational synergies and annual savings of between $550 and $600 million three years after the proposed merger is complete, according to Dollar General.

"Dollar General has developed extensive integration plans across work streams.  The expected synergies would be derived from sales growth driven by an improved merchandise offering and store presentation, purchasing and sourcing efficiencies, distribution and transportation optimization and administrative savings," according to the company.

Source: Retailing Today