Dollar General Corp. (NYSE:DG) has enhanced its bid for Family Dollar Stores, Inc. (NYSE:FDO) by 2% to $80 per share ($9.1 billion) in a renewed effort to win over its competitor from a rival $8.5 billion cash-and-stock bid from Dollar Tree, Inc. (NASDAQ:DLTR).
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As part of the revised proposal, Dollar General Corp. (NYSE:DG) is also willing to sell up to 1,500 stores if required by the U.S. Federal Trade Commission.
Dollar General’s sweetened offer
The biggest dollar-discount chain in the U.S. offered Tuesday to enhance its bid for Family Dollar to $9.1 billion as well as paying a $500 million reverse termination fee if their agreement falls apart over antitrust concerns.
Exuding confidence, Dollar General’s chairman and chief executive Rick Dreiling said in a statement: “We are confident that our enhanced proposal sufficiently addresses any concerns that led Family Dollar Stores, Inc. (NYSE:FDO)’s board of directors to reject our prior proposal without any discussions between our companies”.
Family Dollar’s earlier rejection
As reported last month, Family Dollar Stores, Inc rejected the $9 billion buyout offer from Dollar General Corp. (NYSE:DG) citing concerns that the merger of the nation’s two largest discount retailers might not pass anti-trust review. However, Dreiling emphasized that the store divestitures included in the deal make anti-trust concerns a non-issue. Speculation was rife that Family Dollar Stores, Inc has been trying to convince Dollar General to accept the risk by paying Family Dollar a fee if the deal does get blocked.
Interestingly, activist investor Carl Icahn, who picked up a 9.4% stake in Family Dollar Stores, Inc. (NYSE:FDO) in June believes that Family Dollar’s CEO Howard Levine is just trying to block the Dollar General Corp deal as it would push him to the sidelines, while the Dollar Tree, Inc. (NASDAQ:DLTR) would keep Levine in place as Family Dollar CEO even after the acquisition.
Dollar General may go on offense
In its effort to win the deep-discount-retail war, Dollar General Corp. (NYSE:DG)’s Rick Dreiling said in a letter to Family Dollar’s board on Tuesday: “In the event you refuse to engage with us regarding our revised proposal, we will consider taking our persuasive and superior proposal directly to your shareholders”.
Of note, most analysts say that a merger between Dollar General and Family Dollar Stores, Inc. (NYSE:FDO) is better for both firms than one between Dollar Tree, Inc. (NASDAQ:DLTR) and Family Dollar. Dollar General earlier made an all-cash offer of $78.50 per share when Dollar Tree’s bid was only for $74.50 per share including both stock and cash.