The next chapter of the Dollar Wars is in the book. Family Dollar Stores, Inc. (NYSE:FDO)’s board of directors unanimously voted to advise shareholders to reject the tender offer from Dollar General Corp. (NYSE:DG). They continue to support a buyout by Dollar Tree, Inc. (NASDAQ:DLTR) instead.
Dollar Genera’s offer called “illusory”
In a press release today, Family Dollar called Dollar General’s bid “illusory,” advising shareholders not to tender their shares for that offer.
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“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,” said Family Dollar Chairman and CEO Howard Levine in a statement this morning. “Tenders into the Dollar General Offer will be meaningless since there is no way that Dollar General can purchase shares that are tendered.”
Family Dollar reiterates antitrust concerns
The board also noted that the terms of that offer are the same as those in the previous offer that was made on Sept. 2. The board rejected that offer as well, just a few days later, due to antitrust concerns.
Levine said there’s “a very real and material risk” that Dollar General’s offer would not close after “a lengthy and disruptive review process.” He added that they continue to support the offer from Dollar Tree because they believe it brings “attractive value” through an upfront cash payment and “upside participation” in the combined company.
The executive also said Dollar Tree’s offer brings more certainty that the merger will close.
Trian Fund Management supports Dollar Tree
In this morning’s press release, Family Dollar board member and Trian Fund Management Chief Investment Officer Ed Garden again said they still support the Dollar Tree transaction. He said it removes the antitrust risk and also called the offer from Dollar Tree “illusory” because it can’t close on the terms if offered. Trian has a 7.34% stake in Family Dollar.
The first antitrust waiting period ends on Oct. 10 after the Dollar General bid expires. Garden also accused Dollar General of misrepresenting “that its tender offer was a prerequisite to making its HSR antitrust filing.” He said the discount retail chain is already ware that it could have filed for a regulatory review almost a month ago along with its first unsolicited bid.
In addition, he said that while Dollar General insists that there are no antitrust issues, the proposals the company has made “require Family Dollar shareholders to bear the ultimate risk.” He says the offered reverse breakup fee has an after-tax value of less than $3 per share and doesn’t compensate shareholders for taking on that risk.