Family Dollar Rejects Dollar General's Takeover Bid

August 21, 2014

Family Dollar Stores rejected a $9 billion, all-cash takeover offer from Dollar General, pointing to antitrust concerns and reaffirming its support for its deal with smaller rival Dollar Tree.

Family Dollar's agreement with Dollar Tree, reached late last month, is worth about $8.5 billion in cash and stock, or $74.50 a share.  Family Dollar shares fell slightly to $79.65 in recent remarket trading, still above Dollar General's offer of $78.50, indicating investors expect the fight to drag on.

"Our board reviewed, with our advisers, all aspects of Dollar General's proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed," Chairman and Chief Executive Howard R. Levine said.  "Accordingly, our board rejects Dollar General's proposal and reaffirms its support for the pending merger with Dollar Tree."

A representative from Dollar General wasn't immediately available, while Dollar Tree declined to comment.

The battle over Family Dollar, the second-largest U.S. dollar chain, has come as so-called dollar stores have performed with relative strength compared to the rest of the retail sector, which has been consolidating as customer traffic declines and online competition grows.

Dollar General, the largest of the three dollar stores, had said it would divest 700 stores after a potential merger with Family Dollar to satisfy regulatory concerns.  A combination of Dollar General and Family Dollar would have about 20,000 stores in 46 states, with sales of more than $28 billion, Dollar General has said.

Dollar Tree is No. 3 in the market.

Investor Nelson Peltz's Train Fund Management LP also cited antitrust worries while it offered support for Family Dollar's deal with Dollar Tree.

"Given the significant antitrust issues involved with Dollar General's proposal, we will not jeopardize the Dollar Tree deal for a transaction with Dollar General that has a high likelihood of not closing due to antitrust considerations," Train co-founder and partner Ed Garden said in Family Dollar's release Thursday.  "We remain fully committed to the Dollar Tree transaction."

Combined, Train and Mr. Levine own 16% of Family Dollar's shares.  Train itself had attempted to buy Family Dollar with a $7.75 billion offer the retailer rejected in 2011.  The firm has had a representative on the retailer's board since 2001.

Source: The Wall Street Journal