In the latest chapter in the dollar store wars, Dollar General has increased its bid to acquire Family Dollar Stores in a transaction valued at $9.1 billion, or $80.00 a share. The company also has sweetened the deal by changing the terms of other components of the offer.
Family Dollar on Tuesday confirmed receipt of the letter, and said it will “review and consider the revised proposal.” The board currently continues to recommend support of the planned merger with Dollar Tree Inc.
In a letter to Family Dollar’s board, Rick Dreiling, Dollar General’s chairman and chief executive officer, said the company is willing to shed up to 1,500 stores if required by federal regulators. It also is willing to pay Family Dollar $500 million in a reverse break-up fee in the event it can’t close on the transaction due to antitrust issues.
In early August, Family Dollar rejected Dollar General’s $78.50 a share offer, or a deal valued at $8.5 billion and giving Family Dollar an enterprise value of $9.7 billion. That offer also includes the closure of up to 700 stores to satisfy antitrust concerns.
Family Dollar said last month that it was staying with its July agreement to be acquired by Dollar Tree Inc. at $74.50 a share, or a deal valued at $8.5 billion, giving Family Dollar an enterprise value of $9.2 billion.
Of the proposals on the table, the one by Dollar Tree is friendlier to the existing management at Family Dollar.
And even though the board will be in consultation with its financial and legal advisors in determining whether Dollar General’s latest bid is in fact the better offer, the key could rest in the hands of activist investor Trian Fund Management, which holds a 7.3 percent stake in Family Dollar and has partner Ed Garden as an independent director on Family Dollar’s board.
Some thought the move to reject Dollar General’s initial offer on antitrust grounds was a negotiating tactic for a higher offer. Others thought that the rejection was so Family Dollar’s management could side with a friendlier so-called “white knight.”
Dollar General said Tuesday that Family Dollar’s antitrust analysis was based on a grocery store combination, which can lead to a different conclusion on the antitrust issue since those are “destination” or “stock-up” trips and often have local pricing zones. Dollar General said the better comparison is Walmart stores, whose consumers head there for “fill-in” trips. Prices, the dollar store said, are set differently and there are more national brands carried by both nameplates.
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