MATTHEWS, N.C. -- Family Dollar Stores Inc. said that its board of directors unanimously recommends that Family Dollar's shareholders reject the unsolicited conditional tender offer made by Dollar General Corp. and not tender their shares.
Family Dollar's board also unanimously reaffirmed its recommendation in support of the transaction with Dollar Tree Inc., which made a $74.50-per-share cash-and-stock offer in July.
In a hostile takeover bid earlier this month, Dollar General went directly to Family Dollar shareholders, announcing a tender offer to acquire all outstanding shares of Family Dollar for $80 per share in cash.
The terms of the tender offer are the same as those in the proposal Dollar General made on Sept. 2, 2014, which the Family Dollar board unanimously rejected on Sept. 5, 2014, Family Dollar said.
"Our board of directors, with the assistance of outside advisors and consultants, reviewed all aspects of Dollar General's tender offer and concluded unanimously that this highly conditional offer is illusory because, as Dollar General is well aware, the offer cannot close on the terms proposed. Tenders into the Dollar General offer will be meaningless since there is no way that Dollar General can purchase shares that are tendered," said Howard R. Levine, chairman and CEO of Family Dollar.
"The terms of the Dollar General offer are no different from those in its most recent unsolicited proposal, which was previously and unanimously rejected by our board of directors based on antitrust regulatory considerations," he said.
"There is a very real and material risk that the transaction proposed by Dollar General would fail to close, after a lengthy and disruptive review process," added Levine. "Accordingly, our board has rejected Dollar General's tender offer and reaffirmed its support of the transaction with Dollar Tree, which delivers attractive value in the form of immediate upfront cash and upside participation in a combined Dollar Tree-Family Dollar entity, as well as closing certainty."
Ed Garden, a Family Dollar director and co-founder and chief investment officer at Trian Fund Management LP, a large Family Dollar shareholder said, "We are focused on delivering to Family Dollar shareholders the highest value with certainty, and the Dollar Tree transaction does just that. Dollar Tree has taken the antitrust risk off the table by committing to divest as many stores as necessary to obtain antitrust clearance. We remain fully committed to the Dollar Tree transaction."
He continued, "Rather than eliminating the antitrust risk for Family Dollar shareholders, Dollar General has commenced an illusory tender offer that simply cannot be closed by its own terms. Even the initial antitrust waiting period expires on Oct. 10, 2014, after the expiration date for the Dollar General offer."
Garden added, "Dollar General has misrepresented that its tender offer was a prerequisite to making its HSR antitrust filing; Dollar General knows that it could have filed with antitrust regulators when it first submitted an unsolicited proposal nearly a month ago. As we have highlighted previously, Dollar General has repeatedly stated that antitrust is not a risk, yet they have put forth proposals that require Family Dollar shareholders to bear the ultimate risk. Receiving a reverse breakup fee with an after-tax value of less than $3 a share does virtually nothing to compensate the Family Dollar shareholders for assuming that risk. Accordingly, Family Dollar's Board unanimously rejects the Dollar General Offer and remains fully committed to the transaction with Dollar Tree."
Matthews, N.C.-based Family Dollar currently operates more than 8,100 stores in 46 states. Goodlettsville, Tenn.-based Dollar General has more than 11,000 stores in 40 states. Chesapeake, Va.-based Dollar Tree currently operates more than 5,000 stores in 48 states and five Canadian provinces.
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