Family Dollar Rejects $9B Dollar General Buyout Offer21 Aug, 2014 By: Erik Gruenwedel
Discount chain cites antitrust issues for sticking with Dollar Tree’s lower $8.5 billion bid. The latter would have received $305 million breakup fee if the deal were terminated
Family Dollar Aug. 21 announced that its board had rejected Dollar General’s unsolicited $8.95 billion acquisition offer on the basis of antitrust regulatory considerations. The board also recommended shareholders approve Dollar Tree’s $8.5 billion offer submitted late last month.
Family Dollar’s board, in a statement, said it doubted General’s higher offer was actually better due to issues federal regulators could bring up regarding the combined size of the merged retailers. In addition, Family Dollar would have had to pay Dollar Tree a $305 million break-up fee.
“Our board reviewed, with our advisors, all aspects of Dollar General’s proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed,” Family Dollar CEO Howard Levine said in a statement. “Accordingly, our board rejects Dollar General’s proposal and reaffirms its support for the pending merger with Dollar Tree.”
The merger between Chesapeake, Va.-based Dollar Tree and Matthews, N.C.-based Family Dollar combines more than 13,000 stores across 48 States and five Canadian provinces, with annual sales exceeding $18 billion.
The two chains, which actively sell discount studio movie DVDs via third-party point-of-purchase displays from Echo Bridge Entertainment and others, expects to save upwards of $300 million in annual cost synergies within three years after the close of the sale, which is expected to happen in 2015. Family Dollar began hosting Redbox kiosks in 2012.
Meanwhile, Dollar Tree reported second-quarter (ended Aug. 2) net income of $121.5 million, which was down 2.6% from net income of $124.7 million during the prior-year period. Revenue increased 9.5% to $2 billion. The retailer the attributed the decline due to related Family Dollar acquisition costs.