MATTHEWS, N.C. — The board of Family Dollar Stores Inc. has urged the company’s shareholders to reject the hostile takeover bid by Dollar General Corp.
Family Dollar said Wednesday that its board also unanimously reaffirmed its recommendation that shareholders support its agreement to be acquired by Dollar Tree Stores Inc.
In announcing its board’s recommendation, Family Dollar said it remains unconvinced that the Dollar General bid would be approved. Dollar General has offered $80 a share, or about $9.1 billion overall, compared with the $74.50-per-share deal, valued at $8.5 billion, that Dollar Tree struck in late July with Family Dollar.
Family Dollar’s board concluded that Dollar General’s tender offer is "illusory" because "Dollar General is well aware the offer cannot close on the terms proposed," according to Howard Levine, chairman and chief executive officer of Family Dollar.
"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," Levine said in a statement. "Accordingly, our board has rejected Dollar General’s tender offer and reaffirmed its support of the transaction with Dollar Tree, which delivers attractive value in the form of immediate up-front cash and upside participation in a combined Dollar Tree-Family Dollar entity, as well as closing certainty."
Ed Garden, a Family Dollar board member and a founding partner of New York-based investment firm Trian Fund Management LP, urged shareholders to back the Dollar Tree bid, noting that it "has taken the antitrust risk off the table."
As of late July, Trian was the largest institutional holder of Family Dollar shares, with a 7.3% stake.
Trian emerged as a Family Dollar shareholder in 2011. Company founder Nelson Pelz offered up to $60 a share for the rest of the company, a bid that Family Dollar rejected. Trian was given a seat on Family Dollar’s board, but the takeover attempt failed to garner sufficient support from shareholders and was abandoned.
Family Dollar’s board has twice before rejected Dollar General’s bid, first made in August, shortly after the company had agreed to be acquired by Chesapeake, Va.-based Dollar Tree for $74.50 per share in a combination of $59.60 cash and $14.90 in Dollar Tree stock.
Dollar General last week moved to make a hostile bid for Family Dollar after it rejected a sweetened offer of $80 a share in cash and a pledge to sell or close up to 1,500 stores to satisfy regulators at the Federal Trade Commission.
