MATTHEWS, N.C. -- Family Dollar Stores Inc. said that its board has unanimously rejected Dollar General Corp.'s non-binding $78.50-per-share cash offer to acquire the discount retailer on the basis of antitrust regulatory considerations. 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.
In negotiating the merger agreement with Dollar Tree, the Family Dollar board ensured that the agreement permits the board to negotiate with, provide due-diligence materials to and even terminate the merger agreement to enter into a new agreement with a competing bidder; however, the board may begin negotiations and due-diligence access only if it determines that a proposal from a competing bidder will lead to a superior proposal that "is reasonably likely to be completed on the terms proposed."
The Family Dollar board said it has determined that the Dollar General proposal fails to satisfy this requirement.
The decision follows the unanimous recommendation of a committee of four non-management independent directors that has been overseeing the company's consideration and exploration of strategic alternatives since Jan. 2014.
"Our board of directors, with the assistance of outside advisors and consultants, has been carefully analyzing the antitrust issues in a potential combination with Dollar General since the beginning of this year, as detailed in the company's preliminary proxy statement that was filed by Dollar Tree with the SEC on August 11," said Howard R. Levine, chairman and CEO of Family Dollar. "Our board reviewed … all aspects of Dollar General's proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed. Accordingly, our board rejects Dollar General's proposal and reaffirms its support for the pending merger with Dollar Tree."
He added, "I would also like to note that Dollar General's letter, sent late last night, contained blatant mischaracterizations and did nothing to address the antitrust issues in Dollar General's proposal."
Ed Garden, a co-founder and partner at Trian Fund Management LP, a large shareholder of the company, said, "The CEO of Dollar General said he believes that antitrust is not a risk, but did not put forth a proposal that eliminates regulatory risk for Family Dollar shareholders. Given the significant antitrust issues involved with Dollar General's proposal, we will not jeopardize the Dollar Tree deal for a transaction with Dollar General that has a high likelihood of not closing due to antitrust considerations. We remain fully committed to the Dollar Tree transaction."
Glenn A. Eisenberg, chair of the committee of non-management independent directors overseeing Family Dollar's consideration and exploration of strategic alternatives since January, said, "The directors … believe the Dollar Tree transaction offers substantial and certain value to our stockholders."
The Family Dollar board met with Dollar General several times since Feb. 2013. In Jan. 2014, representatives of Dollar General postponed and then cancelled a scheduled meeting with Family Dollar and said they would be in touch in spring 2014. Family Dollar contacted Dollar General on June 9, 2014, to request that the companies' respective antitrust lawyers meet to discuss antitrust law perspectives on a Family Dollar/Dollar General business combination. Dollar General declined to schedule a discussion on antitrust issues. At a June 19 meeting, representatives of Dollar General stated that they were not interested in pursuing a strategic transaction at that time.
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.
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