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Dollar General Goes Hostile for Family Dollar

10 Sep, 2014 By: Erik Gruenwedel


As expected, Dollar General Sept. 10 announced it is appealing directly to Family Dollar shareholders in a hostile bid to acquire the discount retailer.


As expected, Dollar General Sept. 10 announced it is appealing directly to Family Dollar shareholders in a hostile bid to acquire the discount retailer.

Goodlettsville, Tenn.-based Dollar General said it is offering Family Dollar shareholders $80 per share in cash for all outstanding common stock. The $9.1 billion offer is set to expire Oct. 8. Dollar General said it would also promptly file for a clearance to begin the antitrust approval process with the Federal Trade Commission.

The Dollar General offer tops a previous $8.95 billion bid rejected by Family Dollar’s board, which cited regulatory concerns. Instead, Family Dollar approved a lower $8.5 billion acquisition offer from Dollar Tree submitted July 28.

Dollar stores, which populate much of rural America, have come in vogue recently as they up product selections and appear to be wooing Walmart customers. Consolidation among the major chains is seen as way to increase economies of scale and reduce costs.

For the home entertainment industry, Dollar General and Family Dollar offer last-stop markets for catalog DVDs priced from $3. With Dollar Tree adamant at sticking to a $1 price point for all products, DVD selections are largely limited to rentals through Redbox kiosks in front of stores.

“Our offer provides Family Dollar shareholders with significantly greater value than the existing agreement with Dollar Tree, as well as immediate and certain liquidity for their shares,” Rick Dreiling, CEO of Dollar General, said in a statement. “By taking this step, we are providing all Family Dollar shareholders a voice in this process, and we urge them to tender into our offer.”

Dreiling added that by filing for clearance under the Hart-Scott-Rodino Act, it could begin the antitrust review process and have an opportunity to present its position directly to the FTC.

Dollar General’s latest offer includes a $500 million break-up fee (payable to Family Dollar) and willingness to sell up to 1,500 stores to meet regulatory approval. Indeed, Family Dollar is on the hook to pay $305 million to Dollar Tree should it cancel that transaction.

“As we previously have stated, we are confident in the results of our antitrust analysis, and we look forward to a constructive dialogue with the FTC,” Dreiling said.

 


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