GOODLETTSVILLE, Tenn. — Dollar General Corp. has upped the ante in its battle to acquire Family Dollar Stores Inc. by making a hostile bid for the rival chain.
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Dollar General said Wednesday that has begun a tender offer to buy all outstanding shares of Family Dollar for $80 per share in cash. Totaling about $9.1 billion, the offer is the same as Dollar General’s last proposal to Family Dollar.
Also on Wednesday, Dollar General said it commenced the antitrust approval process with the Federal Trade Commission by filing for clearance under the Hart-Scott-Rodino Act.
Dollar General announced its initial bid to acquire Family Dollar on Aug. 18, offering to pay Family Dollar shareholders $78.50 per share, for a total deal value of $8.95 billion. Citing anticompetitive concerns, Family Dollar rejected Dollar General’s offer a few days later.
Then on Sept. 2, Dollar General increased its bid to $80 per share, or $9.1 billion, and indicated that it would consider going directly to Family Dollar shareholders with the proposal. Yet just days later, Family Dollar rejected the enhanced offer, again citing antitrust concerns. Family Dollar also reaffirmed its aim to proceed with the cash-and-stock deal it struck in late July with Dollar Tree Inc. Under that agreement, Dollar Tree would acquire Family Dollar for $8.5 billion, or $74.50 per share.
Dollar General said Wednesday that its offer provides Family Dollar shareholders with about $640 million of aggregate value over Dollar Tree’s offer and represents a premium of 31.9% over the closing price of $60.66 for Family Dollar stock on the day before the Dollar Tree announcement.
"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," Dollar General chairman and chief executive officer Rick Dreiling 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."
Dollar General reiterated that it would be willing to divest up to 1,500 stores if required by the FTC to clear a merger deal, as well as to pay Family Dollar a $500 million reverse break-up fee if the transaction fell through because of antitrust issues.
"We now can begin the antitrust review process and will have an opportunity to present our position directly to the FTC," Dreiling added. "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."
Just hours after Dollar General’s hostile bid Wednesday morning, Family Dollar confirmed its rival’s tender offer and said that it would review the proposal in consultation with its financial and legal advisers.
"Family Dollar’s board of directors has not changed its recommendation in support of the merger with Dollar Tree Inc.," Family Dollar also stated Wednesday.
On Tuesday, Dollar Tree and Family Dollar received a request for additional information on their merger agreement from the FTC. This "second request" extends the Hart-Scott-Rodino waiting period until 30 days after Dollar Tree and Family Dollar have substantially complied with the request. Both companies have expressed confidence that they will gain regulatory approval for the deal, which they expect to close as early as the end of November.
In rebuffing Dollar General’s bid, Family Dollar has said it believes the FTC would scrutinize the impact of such a deal more closely than Dollar General expects. One key hurdle is pricing, Family Dollar has noted, contending that the FTC would see a combination of the two largest dollar store chains resulting in price hikes for consumers. Dollar General has argued that it and Family Dollar don’t just base their pricing on each other, but also on Walmart locations near their stores, in effect providing a competitive counter to the discount store giant.
Family Dollar also pointed out that Dollar Tree has a different pricing model, offering everything at $1 or less, whereas both Dollar General and Family Dollar sell similar, everyday products at prices of $10 or less.
Last week, Family Dollar also cited the size of a potential merger with Dollar General, which would involve nearly 20,000 stores. "The sheer number of local retail overlaps would be among the greatest the FTC has ever reviewed," Family Dollar stated, adding that a detailed FTC review of so many local geographies would likely result in a prolonged review process.
