Family Dollar spurns Dollar General bid, reaffirms support for Dollar Tree
Family聽Dollar聽Stores Inc rejected聽Dollar聽General Corp's acquisition offer, citing antitrust concerns, and reaffirmed its support for a buyout offer from聽Dollar聽Tree Inc.
"Our board reviewed, with our advisors, all aspects of聽Dollar聽General's proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed,"聽Family聽Dollar's Chief Executive Howard Levine said in a statement.
He also said聽Dollar聽General's letter, sent late on Wednesday, "contained blatant mischaracterizations and did nothing to address the antitrust issues in聽Dollar聽General's proposal".
Dollar General offered about $9.7 billion to acquire Family Dollar this week, trumping an $8.5 billion bid from Dollar Tree.聽
Dollar聽General Corp. said Monday that it would pay $78.50 per share in cash, 3 percent higher than聽Family聽Dollar聽Stores Inc.'s Friday closing price of $76.06.聽Dollar聽General put the deal's value at $9.7 billion.
Last month聽Dollar聽Tree Inc. made an $8.5 billion bid for聽Family聽Dollar. It offered to pay $59.60 in cash and the equivalent of $14.90 in shares of聽Dollar聽Tree for each share they own. The companies put the value of the transaction at $74.50 per share at the time. Including debt and other costs, the companies estimated the transaction to be worth approximately $9.2 billion.
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Dollar聽General said that its offer would create a business with almost 20,000 stores in 46 states and sales of more than $28 billion. The聽Goodlettsville, Tennessee, company anticipates annual savings of $550 million to $600 million three years after the transaction closes.
Representatives for聽Dollar聽Tree and聽Family聽Dollar聽did not immediately respond to requests for comment.
The jockeying to secure聽Family聽Dollar聽comes as discounters look to fend off competition from companies such as聽Wal-Mart Stores Inc., which has been stepping up its courtship of lower-income customers.
Dollar聽stores grew during the recession as people across income groups searched for cheaper options. To attract a broader array of customers, they also expanded their offerings to include more groceries and brand-name products, instead of just the party favors and other knickknacks people often associated with them.
More recently, however, sales at聽dollar聽stores have been suffering because the lower-income customers who go to them are facing persistent job instability and slow wage growth in the aftermath of the recession. Wal-Mart Stores Inc. and Kroger Co. also have been opening smaller store formats to directly compete with聽dollar聽stores.
Dollar聽General and聽Family聽Dollar聽sell products are various prices. At聽Dollar聽Tree, everything at its stores costs just a buck.
Family聽Dollar聽has come into play because of its business struggles. The聽Charlotte, North Carolina聽company has been shuttering stores and cutting prices in hopes of boosting its financial performance. In June investor聽Carl Icahn聽urged the company to put itself up for sale.
Dollar聽General had said that it beleived it could quickly and effectively address any antitrust issues and was willing to divest up to 700 of its stores in order to get the necessary approvals for the transaction.聽Dollar聽Tree had agreed to divest 500 of it US聽stores for its proposed deal.
