“Dollar” Store Wars Begins: Dollar General Throws In Bid To Purchase Family Dollar
A “Dollar” store war is on – Dollar General DG has entered a bid to purchase Family Dollar. The company offered Family Dollar Stores FDO $9.7 billion or $78.50 per share, which surpasses the $8.5 billion offer made by Dollar Tree DLTR in July.
Dollar Tree said it would pay shareholder $59.60 in cash and $14.90 in shares of Dollar Tree for every Family Dollar share they own. The transaction’s value has been quoted at $74.50 a share.
Dollar General’s CEO Rick Dreiling said, for FD shareholders, the proposal made is financially superior to the present transaction agreement that Dollar Tree has with the Family Dollar shareholders with instant liquidity and extensive premium for shares.
Markets anticipate a higher bid to come in for Family Dollars, as its pre-market shares were trading five percent higher at $79.75 on Monday. During pre-market trading, Dollar General shares gained 10 percent to $63.33. Dollar Tree saw a loss of 1.5 percent to $54.80 on the pre-trading market.
The bid Dollar General made could alter the retirement plans of its CEO. Dreiling said he will postpone the planned retirement and stay as chairman and CEO until May 2016, should an agreement be reached and the deal closes.
The possible Family Dollar acquisition may mean Dollar General will need to dissociate from 700 of its stores to relieve itself of prospective antitrust problems.
The company said DG has accepted an important economic and antitrust investigation regarding the transaction and is positive that it can successfully and swiftly deal with the possible antitrust problems.
Dollar General said if the deal goes through, it would reinforce its position as being the largest U.S. small-box discount retailer.
Dollar General operates 11,000 stores in 40 states with a yearly revenue $17.5 billion. If the buyout goes through, it will give the company a combined total in sales of nearly $28 billion. Family Dollar operates in 46 states, has more than 8,200 stores and made $10.39 billion in sales.
If Dollar Tree and Family Dollar were to combine, it would have a combined sales amount of nearly $18 billion.
It’s not clear if Dollar Tree will continue in the bidding war and increase its offer it made in July.
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