Dollar General Bids for Family Dollar

Dollar GeneralGOODLETTSVILLE, Tenn.-A little more than three weeks after Dollar Tree apparently cut a deal to acquire Family Dollar, Dollar General has made its own proposal to purchase its rival dollar-store chain.

Dollar General's bid, which was delivered this morning in a letter to Family Dollar's board of directors, is for $78.50 a share in cash, which would bring the total value of the transaction to $9.7 billion. The agreement between Family Dollar and Dollar Tree calls for a combined cash-and-stock offer of $74.50 a share, or a total value of about $8.5 billion.

According to a Dollar General statement, Rick Dreiling, the company's chairman and CEO, would postpone his previously announced retirement and remain as chairman and CEO of the combined company until May 2016, should the two retailers sign a merger agreement. Beyond that date, Dreiling would agree to remain a board member and serve as chairman if asked by the board and if elected by the shareholders.

According to the Dollar General Statement, the transaction, if completed, "would create the preeminent small-box retailer in the U.S. based on store locations, delivering convenience and everyday low prices to customers through nearly 20,000 stores in 46 states, with sales exceeding $28 billion and over 160,000 employees." Other advantages of this deal would be complementary business models, synergies of $550 million to $700 million on an annual run-rate for three years after closing and "significant earnings accretion through synergies."

Dreiling called the Dollar General-Family Dollar merger "financially superior to the current transaction agreement with Dollar Tree, and would provide Family Dollar shareholders with a substantial premium and immediate liquidity for their shares. For Dollar General shareholders, the proposed combination of Dollar General and Family Dollar would be a significant strategic opportunity to create immediate and lasting shareholder value. For both Dollar General and Family Dollar customers, we would be able to provide better value and greater selection."

Randy Guiler, vice president of investor relations for Dollar Tree, said the company had no comment on Dollar General's move. At press time, a Family Dollar spokeswoman said the company is working on a response.

HFN Staff | News & Commentary

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