Family Dollar rejects Dollar General’s 9.1-bn sweetened takeover bid

Family Dollar says bid harder to get past antitrust regulators

FAMILY Dollar Stores spur ned a sweetened $9.1 billion bid from Dollar General, saying it would be harder to get past antitrust regulators than a lower offer from Dollar Tree.

Family Dollar’s board unanimously rejected Dollar General’s bid, which was announced on Sept 2, according to a statement today. The move marks the second time the Matthews, North Carolina-based company has used antitrust concerns to tur n down an offer from Dollar General, the top U.S. dollar-store chain.

“There is a very real and material risk that the transaction proposed by Dollar General would fail to close, after a lengthy and disruptive review process,” Family Dollar Chief Executive Officer Howard Levine said in the statement. The board also “reaffir med its support of the transaction with Dollar Tree, which delivers attractive value in the for m of immediate upfront cash and upside participation in a combined Dollar TreeFamily Dollar entity, as well as closing certainty.”

The takeover fight for Family Dollar began in July, when the company agreed to be acquired by Dollar Tree for $8.5 billion, or $74.50 a share. That deal would merge the market’s No. 2 and No. 3 companies, potentially unseating Dollar General as the leader. Dollar General then stepped in with an unsolicited bid of $78.50 in August, aiming to maintain its perch atop the industry.

After that offer was rejected because of antitrust concer ns, Dollar General increased its price this week to $80 a share in cash. Along with the sweetened bid, Dollar General said it would sell as many as 1,500 locations to placate regulators, up from 700 in its earlier offer. It also would pay Family Dollar $500 million if the deal failed to gar ner approval.

In snubbing the higher bid, Family Dollar said its experience with Federal Trade Commission regulators reviewing the Dollar Tree deal has led it to believe a Dollar General merger would have a harder time getting clearance. A transaction between Dollar Gen- eral and Family Dollar would create a chain with almost 20,000 locations and plenty of overlap, meaning the FTC would struggle to review the proposal in a timely manner, according to today’s statement.

Family Dollar and Dollar General have a similar business model, with the chains selling products at multiple prices and mostly catering to low-income shoppers. Dollar Tree, in contrast, attracts more middle-class consumers and sells most of its items at $1.

“If the FTC is questioning the Dollar Tree bid, they’re definitely going to question the Dollar General bid,” said Brian Yarbrough, an analyst at Edward Jones in St. Louis.

Separately, Dollar Tree said it was ready to close as many stores as necessary to complete its merger with Family Dollar. The companies expect to receive a second request for information on the transaction from the FTC next week, though the deal could be closed as soon as November -- earlier than originally expected.

“Unlike Dollar General, we expect to be required to divest few, if any, stores because our business model is significantly different from Family Dollar’s model,” Dollar Tree CEO Bob Sasser said in a statement. “Our product assortment and pricing is not driven by local competition, and we have very limited store overlap.”

Bloomberg