Dollar General boosts Family Dollar offer in takeover tussle

  • By Matt Townsend Bloomberg News
  • Tuesday, September 2, 2014 2:21pm
  • Business

Dollar General, fighting to maintain its lead in the industry, raised its bid for Family Dollar Stores and threatened to take the offer directly to investors if it gets rejected again.

Dollar General bid $9.1 billion, or $80 a share in cash, compared with an offer of $78.50 made two weeks ago that was rebuffed on antitrust concerns. Dollar General said it would sell as many as 1,500 locations, up from 700 in its previous approach, and pay Family Dollar $500 million if the deal fails on regulatory approval.

Tuesday’s sweetened proposal escalates a bidding war against Dollar Tree, which had won over Family Dollar with a July offer of $8.5 billion, or $74.50 a share — a deal seen as more friendly to antitrust regulators. If that merger goes ahead, Dollar General risks losing its rose as the largest dollar-store chain just as Wal-Mart Stores Inc. pushes into the market with smaller-format stores.

“Family Dollar definitely has some more thinking to do,” said Poonam Goyal, a senior retail analyst for Bloomberg Intelligence. By increasing the stores it is willing to divest, Dollar General is “definitely showing that it wants to make this deal happen.”

Stock for Family Dollar, based in Matthews, North Carolina, had been trading above Dollar General’s rejected offer, a sign that investors expected the chain to raise its bid. Dollar General, based in Goodlettsville, Tennessee, gained 0.9 percent to $64.56 while Dollar Tree advanced 1.8 percent to $54.60.

“Family Dollar’s board of directors, in consultation with its legal and financial advisers, will review and consider the revised proposal,” the company said in a statement Tuesday.

Randy Guiler, a spokesman for Dollar Tree, declined to comment.

The pursuit of Family Dollar has created tension between it and Dollar General. The companies have publicly traded barbs, accusing each other of misstating facts surrounding a meeting on June 19 to discuss a possible combination.

Family Dollar has painted a picture of Dollar General as an unserious suitor that only decided to bid after discovering its rival’s offer and hasn’t adequately addressed antitrust issues. Dollar General, meanwhile, is portraying Family Dollar’s leadership as more interested in its own well-being than that of its shareholders.

One remaining obstacle may be that Dollar General’s offer doesn’t ensure a place for Family Dollar Chief Executive Officer Howard Levine at a combined company, Goyal said. As part of Dollar Tree’s deal to buy Family Dollar, which was announced on July 28, Levine would continue running the chain his father founded and report to Dollar Tree CEO Bob Sasser. Meanwhile, Dollar General CEO Rick Dreiling declined to comment on Levine’s future role when asked last month.

In Tuesday’s letter to Family Dollar’s board laying out the new offer, Dreiling said the chain increased its antitrust analysis by hiring Richard Feinstein, the former director of the Bureau of Competition for the Federal Trade Commission, to review the work. Feinstein, who now works for law firm Boies, Schiller &Flexner, concluded the transaction can be completed based on the first offer, Dreiling said.

“Given the details of our revised proposal, we are certain that you will conclude that our revised proposal” is superior, Dreiling said in the letter. And if Family dollar doesn’t, Dollar General will consider making a hostile bid, he said.

The battle for Family Dollar began after activist investors Carl Icahn and Nelson Peltz took large stakes in the retailer and pushed for a sale. Icahn still owns about 3.6 percent of the shares.

Meanwhile Peltz’s Trian Fund Management has a 7.3 percent stake as the second-largest shareholder after Levine. Trian also has a seat on its board, providing incentive to seek the highest offer. Ed Garden, co-founder of the investment firm, serves on the committee overseeing the sale process.

Of the two potential suitors, Dollar General offers the most opportunity for cutting costs because the companies have such similar business models, Goyal has said. That’s also why there’s more concern over the FTC approving the deal.

Both Family Dollar and Dollar General offer a variety of food and consumer goods at multiple prices and cater to low- income shoppers. Dollar Tree, in contrast, attracts more middle- class consumers and sells most items at $1.

Dollar General’s projection for $600 million in annual cost savings from the merger is twice what Dollar Tree estimated in its deal to buy Family Dollar.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

Black Press Media operates Sound Publishing, the largest community news organization in Washington State with dailies and community news outlets in Alaska.
Black Press Media concludes transition of ownership

Black Press Media, which operates Sound Publishing, completed its sale Monday (March 25), following the formerly announced corporate restructuring.

Maygen Hetherington, executive director of the Historic Downtown Snohomish Association, laughs during an interview in her office on Thursday, Feb. 15, 2024, in Snohomish, Washington. (Ryan Berry / The Herald)
Maygen Hetherington: tireless advocate for the city of Snohomish

Historic Downtown Snohomish Association receives the Opportunity Lives Here award from Economic Alliance.

FILE - Washington Secretary of State Steve Hobbs poses in front of photos of the 15 people who previously held the office on Nov. 22, 2021, after he was sworn in at the Capitol in Olympia, Wash. Hobbs faces several challengers as he runs for election to the office he was appointed to last fall. (AP Photo/Ted S. Warren, File)
Secretary of State Steve Hobbs: ‘I wanted to serve my country’

Hobbs, a former Lake Stevens senator, is the recipient of the Henry M. Jackson Award from Economic Alliance Snohomish County.

Mark Duffy poses for a photo in his office at the Mountain Pacific Bank headquarters on Wednesday, Feb. 14, 2024 in Everett, Washington. (Annie Barker / The Herald)
Mark Duffy: Building a hometown bank; giving kids an opportunity

Mountain Pacific Bank’s founder is the recipient of the Fluke Award from Economic Alliance Snohomish County.

Barb Tolbert poses for a photo at Silver Scoop Ice Cream on Thursday, Feb. 29, 2024 in Arlington, Washington. (Annie Barker / The Herald)
Barb Tolbert: Former mayor piloted Arlington out of economic brink

Tolbert won the Elson S. Floyd Award, honoring a leader who has “created lasting opportunities” for the underserved.

Photo provided by 
Economic Alliance
Economic Alliance presented one of the Washington Rising Stem Awards to Katie Larios, a senior at Mountlake Terrace High School.
Mountlake Terrace High School senior wins state STEM award

Katie Larios was honored at an Economic Alliance gathering: “A champion for other young women of color in STEM.”

The Westwood Rainier is one of the seven ships in the Westwood line. The ships serve ports in the Pacific Northwest and Northeast Asia. (Photo provided by Swire Shipping)
Westwood Shipping Lines, an Everett mainstay, has new name

The four green-hulled Westwood vessels will keep their names, but the ships will display the Swire Shipping flag.

A Keyport ship docked at Lake Union in Seattle in June 2018. The ship spends most of the year in Alaska harvesting Golden King crab in the Bering Sea. During the summer it ties up for maintenance and repairs at Lake Union. (Keyport LLC)
In crabbers’ turbulent moment, Edmonds seafood processor ‘saved our season’

When a processing plant in Alaska closed, Edmonds-based business Keyport stepped up to solve a “no-win situation.”

Angela Harris, Executive Director of the Port of Edmonds, stands at the port’s marina on Wednesday, Jan. 24, 2024, in Edmonds, Washington. (Ryan Berry / The Herald)
Leadership, love for the Port of Edmonds got exec the job

Shoring up an aging seawall is the first order of business for Angela Harris, the first woman to lead the Edmonds port.

The Cascade Warbirds fly over Naval Station Everett. (Sue Misao / The Herald file)
Bothell High School senior awarded $2,500 to keep on flying

Cascade Warbirds scholarship helps students 16-21 continue flight training and earn a private pilot’s certificate.

Rachel Gardner, the owner of Musicology Co., a new music boutique record store on Thursday, Jan. 18, 2024 in Edmonds, Washington. Musicology Co. will open in February, selling used and new vinyl, CDs and other music-related merchandise. (Olivia Vanni / The Herald)
New Edmonds record shop intends to be a ‘destination for every musician’

Rachel Gardner opened Musicology Co. this month, filling a record store gap in Edmonds.

MyMyToyStore.com owner Tom Harrison at his brick and mortar storefront on Tuesday, Sept. 6, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Burst pipe permanently closes downtown Everett toy store

After a pipe flooded the store, MyMyToystore in downtown Everett closed. Owner Tom Harrison is already on to his next venture.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.