Table of Contents
NEW YORK — Dollar General Corp. has raised the pressure on Family Dollar Stores Inc. directors and shareholders by sweetening its bid for the discount chain and offering to sell or close up to 1,500 stores to satisfy antitrust regulators.
However, just days later, Family Dollar announced that it was rejecting the enhanced acquisition bid.
The latest offer was sent September 2 to directors at Matthews, N.C.-based Family Dollar, who earlier indicated a preference for an alternative, albeit lower, bid from Dollar Tree Stores Inc. on the grounds that it is more likely to win approval from the Federal Trade Commission.
To counter such concerns, Dollar General more than doubled the number of stores it is offering to sell. The company also raised its all-cash bid to $80 a share, from the $78.50 it offered on August 18.
“We are confident that our enhanced proposal sufficiently addresses any concerns that led Family Dollar’s board of directors to reject our prior proposal without any discussions between the companies,” said Rick Dreiling, Dollar General’s chairman and chief executive officer.
As a measure of Dollar General’s confidence that its revised offer would pass regulatory muster, the bid includes a $500 million reverse breakup fee, meaning that Dollar General would pay Family Dollar that amount if a deal was rejected for antitrust reasons.
Family Dollar on September 2 acknowledged receipt of what it characterized as “a revised, nonbinding, unsolicited proposal from Dollar General” and said its board would huddle with the company’s legal and financial advisers to weigh the offer.
In late July, Family Dollar agreed to Dollar Tree’s offer of $74.50 per share in a combination of $59.60 cash and $14.90 in Dollar Tree stock. Total value of that deal was estimated at $8.5 billion. A subsequent offer from Dollar General worth $9.7 billion was summarily rejected, on the grounds that regulators would oppose a merger of the nation’s two largest dollar store chains, whereas antitrust concerns would not block a tie-up with Chesapeake, Va.-based Dollar Tree, which prices everything at $1 or less. Dollar General and Family Dollar sell similar everyday products at a price point of $10 or less.
Additionally, Dollar Tree agreed to keep the Family Dollar name on the acquired stores, and to keep chairman and chief executive officer Howard Levine on the board for at least two years.
In the letter to Family Dollar’s board, Dreiling suggested that Dollar General could go hostile with its offer if Family Dollar’s board failed to restart talks.
“In the event you refuse to engage with us regarding our revised proposal, we will consider taking our persuasive and superior proposal directly to your shareholders, as we are firmly committed in our belief that a combination of our companies is in their best interests,” he wrote.
Yet on September 5 Family Dollar turned down Dollar General’s sweetened acquisition proposal for the same reason it nixed the first offer: antitrust concerns. At the same time, Family Dollar reaffirmed its aim to proceed with the cash-and-stock deal it struck with Dollar Tree.
"Our board of directors, with the assistance of outside advisors and consultants, reviewed all aspects of Dollar General’s revised proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed," Family Dollar chairman and chief executive officer Howard Levine said in a statement. "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. Accordingly, our board has rejected Dollar General’s revised proposal and reaffirmed its support of the transaction with Dollar Tree, which delivers attractive value in the form of immediate upfront cash and upside participation in a combined Dollar Tree-Family Dollar entity, as well as closing certainty."
Dollar Tree and Family Dollar also announced that they have amended their merger agreement to include a commitment by Dollar Tree to divest as many stores as necessary or advisable to obtain antitrust clearance for the transaction. The two companies, too, said they expect the deal to close sooner, as early as the end of November.
"Dollar Tree is committed to working hard to complete our acquisition of Family Dollar as quickly as possible. Our amended agreement is clearly superior to Dollar General’s revised proposal based on antitrust risk, deal certainty and time value of money," stated Dollar Tree CEO Bob Sasser. "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. Our product assortment and pricing is not driven by local competition, and we have very limited store overlap. As evidence of our confidence in and commitment to closing this transaction without delay, we are amending our merger agreement to provide for a commitment to divest as many stores as necessary to obtain antitrust clearance."
