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Dollar General Outbids Dollar Tree's Offer for Family Dollar

18 Aug, 2014 By: Erik Gruenwedel

Discount retailer’s $8.95 billion offer tops Dollar Tree’s bid by $1.2 billion

Appeal for the "dollar" is getting stronger.

Dollar General Aug. 18 announced it has submitted a bid to acquire Family Dollar Stores for $78.50 per share in cash, in a transaction valued at $8.95 billion.

Goodlettsville, Tenn.-based Dollar General’s offer letter to the Family Dollar board tops Dollar Tree’s $8.5 billion bid for Family Tree submitted July 28. The new bid would solidify Dollar General's position as the largest small-box discount retailer in the United States with nearly 20,000 stores in 46 states and sales of more than $28 billion, employing 160,000 people.

Dollar stores have grown from a rural player to national retail footprint following the 2008 economic recession, coupled with Walmart’s efforts to attract more affluent shoppers with expanded and pricier products.

“I think the lower-income consumer continues to be under pressure and they’re visiting the dollar stores for fill-in trips. I think that’s why Walmart’s struggling,” Brian Yarborough, analyst with Edwards Jones, told Forbes.

Dollar stores also aggressively market discounted DVD movies featuring catalog titles and genre-themed disc bundles in point-of-purchase displays.

Dollar General said the merger is “highly complementary,” with the proposed transaction expected to generate synergies of $550 million to $600 million on an annual basis three years after the closing of the deal. 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.

"We have the utmost respect for Family Dollar, its leadership and its employees. 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," Dollar General CEO Rick Dreiling said in a statement.

Analyst Yarborough said for consumers it’s more about convenience than respect. He said it is easier to frequent a local dollar store for a carton of milk or loaf of bread than it is to visit a big-box store.

“It’s a huge hassle,” Yarborough said.

Dollar Tree reports quarterly fiscal results Aug. 21.


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