Dollar General Not Giving Up on Family Dollar
Confident it can address antitrust issues
GOODLETTSVILLE, Tenn. -- Following Family Dollar Store Inc.'s rejection of its acquisition proposal, Dollar General Corp.'s CEO Rick Dreiling said, "We are disappointed that the Family Dollar board of directors has concluded that our proposal is not reasonably expected to lead to a superior proposal without informing itself of all relevant information."
Family Dollar on Aug. 21 unanimously rejected Dollar General's $78.50-per-share cash offer to acquire the discount retailer, citing the antitrust concerns. The Family Dollar board also unanimously reaffirmed its recommendation in support of the merger agreement with Dollar Tree Inc.
Dollar General's offer is valued at $9.7 million. Family Dollar's agreement with Dollar Tree is valued at $8.5 billion in cash and stock.
The convenience store industry is watching the drama closely, as is Wal-Mart. The outcome of a deal with either Dollar Tree of Dollar General may determine whether the new, larger discount entity is a competitive threat to the c-store channel, the large discount channel, or both.
"We have done extensive antitrust analysis using experienced advisers, the results of which confirm that the transaction as proposed is capable of being completed. We remain willing to share this analysis with Family Dollar and its counsel and are confident that we will be able to quickly and efficiently resolve any potential antitrust issues," said Dreiling. "We are carefully reviewing and considering our options. Our existing all-cash proposal coupled with manageable antitrust issues continues to make our proposal superior to the current transaction agreement with Dollar Tree."
In a previous letter to the Family Dollar board, dated Aug. 20, he said, "We believe that the number of store divestitures contained in our offer letter is more than sufficient to take [the antitrust] issue completely off the table."
In that letter, he also said that "on more than one occasion … [Family Dollar CEO] Howard Levine expressed his own interest in the social issues of a combination, including, among other things, his desire to be chief executive officer of the combined companies. We cannot help but question whether Dollar General's failure to embrace such requests by Mr. Levine weighed into Family Dollar's decision to pursue an agreement with Dollar Tree."
He added that it was "surprising," that "no representative of Family Dollar followed up with any representative of Dollar General … before entering into the merger agreement with Dollar Tree. This lack of engagement is puzzling. Regrettably, as a result, we are now forced to factor a $305 million breakup fee into our offer--consideration that could have been better used to maximize value for the Family Dollar shareholders."
Goodlettsville, Tenn.-based Dollar General has more than 11,000 stores in 40 states. Matthews, N.C.-based Family Dollar currently operates more than 8,100 stores in 46 states. Chesapeake, Va.-based Dollar Tree currently operates more than 5,000 stores in 48 states and five Canadian provinces.