Elliott Advisors (UL) Limited, an affiliate of Elliott Management, an investment management firm headed by Paul Singer nominated seven executives to the board of directors of Family Dollar Stores, Inc. (NYSE:FDO) to protect its investment in the discount retailer.
Elliott is one of the largest shareholders of Family Dollar Stores, Inc. (NASDAQ:FDO) with approximately 4.9% interest in the outstanding common stock of the company.
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In a letter to the board of directors of Family Dollar Stores, Inc. (NYSE:FDO), Elliott said, “We took this action in order to protect our interests as one of Family Dollar’s largest shareholders.”
Elliott emphasized that its decision to nominate a slate of highly-qualified directors to ensure that Family Dollar’s board does everything within its power to provide Dollar General Cor.p (NYSE:DG) with an equal playing filed in its continuing efforts to acquire the company.
Elliott emphasized that the price levels offered by Dollar General Corp. (NYSE:DG) to acquire Family Dollar Stores, Inc. (NYSE:FDO) are “clearly superior” than the consideration under its current merger agreement with Dollar Tree, Inc. (NASDAQ:DLTR).
Family Dollar must seek to maximize shareholder value
Elliott praised the efforts of the board of Family Dollar Stores, Inc. (NYSE:FDO) in negotiating a deal with Dollar Tree, Inc. (NASDAQ:DLTR) that delivers meaningful premium and high degree of certainty to shareholders. However, the firm emphasized that the board missed the opportunity to facilitate a bidding war between the two large and well-capitalized strategic acquirers.
Family Dollar Stores, Inc. (NYSE:FDO) must now seek to maximize value for shareholders with the restrictive covenants and other practical limitations of a merger agreement in place,” said Elliott.
In addition, Elliott emphasized that Family Dollar Stores, Inc. (NYSE:FDO) will be forced to pay a termination fee of approximately $2.68 per share if Dollar General Corp. (NYSE:DG) succeed in its efforts to acquire the company.
Elliott said, “Given Dollar General’s ability to pay a significantly higher price than the $80 per share currently on offer, we believe it is incumbent on the board to take all steps necessary to assess the deliverability of a superior Dollar General proposal. It is our sincere hope that the Board will have a renewed opportunity to do so.
Elliott expressed concern on board’s expertise and independence
Elliott expressed concern that some of the members of the board of Family Dollar Stores, Inc. (NYSE:FDO) lack expertise and/or independence to successfully navigate and negotiate a value maximizing outcome for shareholders.
The firm noted that a majority of the directors of the company does not appear to have relevant experience about its ongoing strategic process. Elliott is uncertain whether the board is composed of individuals with the ability to guide Family Dollar Stores, Inc (FDO) through a complex pathway ahead and to act for the best interest of shareholders.
Elliott emphasized that the board’s actions to date in connection with the strategic review process failed to demonstrate sufficiently that it had the best interest of shareholders in mind.
Eliott’s nominees to Family Dollar’s board
The seven executives nominated by Elliott to the board of Family Dollar Stores, Inc. (NYSE:FDO) include:
- Fredric Reynold, a former vice president and CFO of CBS Corporation (NYSE:CBS)
- Jonathan Macey, a professor at Yale Law School
- Ted French, a former executive vice president and CFO at Textron Corporation.
- James Shinehouse, a partner at Atlantic Financial Advisory Partners
- Marshall Heinberg, a former head of Investment Banking at Oppenheimer & Co. Inc.
- Mark Levine, senior portfolio manager at Elliott Advisors (UK) Ltd
- Mark Wills, associate portfolio manager at Elliott Advisors (UK) Ltd