The biggest dollar-discount chain in the U.S. has decided to take its $9.1 billion offer directly to Family Dollar Stores, Inc. (NYSE:FDO) shareholders in a hostile bid.
Family Dollar has said antitrust concerns are at the heart of its decision to reject Dollar General Corp. (NYSE:DG)’s proposed merger.
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Dollar General’s sweetened offer
Last week, 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 its renewed bid to win over its competitor in the face of an $8.5 billion cash-and-stock bid from Dollar Tree Inc.
Dollar General also indicated that it would pay a $500 million reverse termination fee if their agreement falls apart over antitrust concerns.
In a letter to Family Dollar Stores, Inc. (NYSE:FDO)’s board last week, Dollar General’s chief executive warned of a hostile bid: “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”.
However, last week, Family Dollar and Dollar Tree, Inc. (NASDAQ:DLTR) went so far as to include a “hell or high water” clause, pledging to do whatever is required to clear the deal with regulators. The biggest dollar-discount chain in the U.S. has said it would sell up to 1,500 stores to win antitrust approval, though it hasn’t yet offered to include a “hell or high water” clause.
While initiating the hostile bid, DG CEO Rick Dreiling said in a statement: “Our offer provides Family Dollar Stores, Inc. (NYSE:FDO) shareholders with significantly greater value than the existing agreement with Dollar Tree as well as immediate and certain liquidity for their shares. By taking this step, we are providing all Family Dollar shareholders a voice in this process, and we urge them to tender into our offer.”
The latest tender offer would facilitate Dollar General to initiate discussions with the Federal Trade Commission about what divestitures might be needed for a deal to gain approval.
Family Dollar said it was reviewing the tender offer from Dollar General Corp. (NYSE:DG) and advised shareholders not to take action until it could make a recommendation. To date Family Dollar has accepted a lower bid from Dollar Tree instead, indicating that deal will more easily gain regulatory clearance.
Some reports highlight that Family Dollar Stores, Inc. (NYSE:FDO), with over 8,000 stores across 46 states, and Dollar General, with over 11,500 stores in 40 states, combined would have more stores than McDonald’s Corporation (NYSE:MCD), which has over 14,000 total outlets.