Family Dollar Urges Shareholders To Take Dollar Tree Deal, Call Proposal A “Virtual Certainty”

Just weeks after Family Dollar appeared to show a change of heart in the months-long dollar store soap opera, officials with the company are once again pushing for approval of a deal with smaller rival Dollar Tree despite a heftier bid by Dollar General.

The Wall Street Journal reports that Family Dollar sent a letter to shareholders urging them to approve the $8.5 billion takeover offer from Dollar Tree.

The company argues that closing the deal was a “virtual certainty” compared to the higher $9.1 billion bid from Dollar General.

Family Dollar continues to push its stance that the deal with Dollar General wouldn’t stand-up to regulatory approval.

In the letter, Family Dollar says that following talks with the government, they believe it would be difficult for Dollar General to divest itself of enough stores to secure approval, saying there could be as many as 3,500 to 4,000 “presumptively problematic” stores in Dollar General’s proposal.

Howard Levine, Family Dollar chief executive, says in the letter that recent talks with regulators “reaffirms the statements that we have been making for several months now about the inability of the Dollar General proposal to be consummated on the terms proposed by Dollar General and the certainty of the Dollar Tree merger.”

For its part, Dollar Tree officials tell the Wall Street Journal that the company expects to reach a deal with the Federal Trade Commission over how many stores it must divest by the end of the month.

Early reports from the FTC suggest that around 300 stores would have to be divested for the proposal to gain approval. Dollar Tree says it has already identified potential buyers for some of those stores.

Family Dollar said the merger with Dollar Tree could close as soon as March.

The latest chapter in the dollar store saga comes less than a month after Family Dollar shareholders started and then immediately adjourned a meeting to give Dollar General more time to convince them that its proposal was worth taking.

The sordid dollar store love triangle began back in July when Dollar Tree made an $8.5 billion bid for North Carolina-based Family Dollar. Not one to feel left out, Dollar General proceeded to provide an unsolicited bid of $8.95 billion for the smaller chain.

But Family Dollar wasn’t feeling the love and rejected the offer citing “significant antitrust issues” because the two chains have similar business models. Both Dollar General and Family Dollar sell items at different dollar price points, catering to low-income shoppers, while Dollar Tree caters to more middle-income shoppers and sells most items at $1.

Dollar General came back with a second bid of $9.1 billion and in an attempt to ease Family Dollars’ anti-trust review fears it proposed closing 1,500 of the potentially combined-companies 20,000 stores.

Yet, that still wasn’t enough and Family Dollar rejected the bid, choosing instead to stay with its true love, Dollar Tree. Dollar General subsequently turned hostile, taking its big directly to shareholders in September.

Family Dollar: Dollar Tree Bid Is a ‘Virtual Certainty’ [The Wall Street Journal]