Dollar General enters bidding war for Family Dollar

From Staff Reports news@newnan.com

Dollar General Corp. announced Monday that the company would offer $9.7 billion for Family Dollar in an attempt to trump Dollar Tree’s initial $8.5 billion bid, according to Associated Press.

Last month Dollar Tree Inc. offered to pay $59.60 in cash and the equivalent of $14.90 in shares of Dollar Tree for each share of Family Dollar they own. The companies put the value of the transaction at $74.50 per share at the time. Including debt and other costs, the companies estimated the transaction to be worth more than $9 billion.

On Monday, Dollar General Corp. said that it would pay $78.50 per share in cash, 3 percent higher than Family Dollar Stores Inc.'s Friday closing price of $76.06, Associated Press reported.

Coweta County currently hosts franchises for all three companies.

Dollar General said that its offer would create a business with almost 20,000 stores in 46 states and sales of more than $28 billion, according to AP.

Representatives for Dollar Tree and Family Dollar did not immediately respond to requests for comment.

The jockeying to secure Family Dollar comes as discounters look to fend off competition from companies such as Walmart Stores Inc., which has been stepping up its courtship of lower-income customers, according to the Associated Press.

Dollar stores grew during the recession as people across income groups searched for cheaper options. To attract a broader array of customers, they also expanded their offerings to include more groceries and brand-name products, instead of just the party favors and other knickknacks people often associated with them.

More recently, however, sales at dollar stores have been suffering because the lower-income customers who go to them are facing persistent job instability and slow wage growth in the aftermath of the recession. Walmart Stores Inc. and Kroger Co. also have been opening smaller store formats to directly compete with dollar stores.

Dollar General and Family Dollar sell products are various prices. At Dollar Tree, everything at its stores costs just a buck.

Family Dollar has come into play because of its business struggles. The Charlotte, North Carolina company has been shuttering stores and cutting prices in hopes of boosting its financial performance. In June investor Carl Icahn urged the company to put itself up for sale.

Dollar General said that it believes it can quickly and effectively address any antitrust issues and is willing to divest up to 700 of its stores in order to get the necessary approvals for the transaction, according to Associated Press. Dollar Tree had agreed to divest 500 of its U.S. stores for its proposed deal.

If a deal goes through, Dollar General said that Chairman and CEO Rick Dreiling has agreed to postpone his retirement until May 2016 in order to help with the integration of the two companies.

Dreiling has also agreed to remain as a director – and would be willing to serve as chairman – if asked by the board and elected by shareholders.

Dollar General said that Goldman Sachs and Citigroup Global Markets Inc. have agreed to provide committed financing, which would include the $305 million termination fee due to Dollar Tree if Family Dollar chooses a deal with Dollar General instead. Dollar General's board unanimously approved the Dollar Tree deal. Its stock rose $5.04, or 8.8 percent, to $62.50 in premarket trading.

Shares of Dollar Tree, which is based in Chesapeake, Virginia, fell 60 cents to $55 before the market open.



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