Family Dollar Turns Down Dollar General's Revised Bid
MATTHEWS, N.C. -- Family Dollar Stores Inc. has once again rejected Dollar General Corp.'s move to acquire the company on the basis of antitrust regulatory considerations.
Goodlettsville-based Dollar General submitted a revised, non-binding proposal to buy Family Dollar on Sept. 2. That second bid came after Matthews-based Family Dollar turned down its original proposal submitted on Aug. 18, as CSNews Online previously reported.
"Our board of directors, with the assistance of outside advisors and consultants, reviewed all aspects of Dollar General’s revised proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed," said Howard R. Levine, chairman and CEO of Family Dollar.
"There is a very real and material risk that the transaction proposed by Dollar General would fail to close, after a lengthy and disruptive review process. Accordingly, our board has rejected Dollar General’s revised proposal and reaffirmed its support of the transaction with Dollar Tree, which delivers attractive value in the form of immediate upfront cash and upside participation in a combined Dollar Tree-Family Dollar entity, as well as closing certainty.”
Instead, Family Dollar is standing by its existing $8.5-billion merger agreement with Dollar Tree Inc.
“We are focused on delivering to Family Dollar shareholders the highest value with certainty, and the Dollar Tree transaction does just that," said Ed Garden, a Family Dollar director. "Dollar Tree has taken the antitrust risk off the table by committing to divest as many stores as necessary to obtain antitrust clearance. We remain fully committed to the Dollar Tree transaction.”
Garden is also co-founder and chief investment officer at Trian Fund Management LP, a large shareholder of Family Dollar.
“Dollar General’s revised proposal, on the other hand, does not eliminate regulatory risk for Family Dollar shareholders," Garden added. "Dollar General has repeatedly stated that antitrust is not a risk, yet they have put forth proposals that require Family Dollar shareholders to bear the ultimate risk. Receiving a reverse breakup fee with an after-tax value of less than $3 a share does virtually nothing to compensate the Family Dollar shareholders for assuming that risk.”
In an amended merger agreement, Chesapeake, Va.-based Dollar Tree said it will divest as many stores as necessary or advisable to obtain antitrust clearance for the previously announced cash and stock transaction. All other terms and conditions of the merger agreement remain the same as announced on July 28.
The two companies also announced they have pushed up the expected closing date for the deal to as early as the end of November.
In addition, Family Dollar and Dollar Tree disclosed that they expect the Federal Trade Commission (FTC) to issue a second request for additional information on Sept. 8. The second request was expected and the companies are confident that regulatory approval will be obtained.
“Dollar Tree is committed to working hard to complete our acquisition of Family Dollar as quickly as possible. Our amended agreement is clearly superior to Dollar General’s revised proposal based on antitrust risk, deal certainty and time value of money," said Bob Sasser, Dollar Tree’s CEO. "Unlike Dollar General, we expect to be required to divest few, if any, stores because our business model is significantly different from Family Dollar’s model. Our product assortment and pricing is not driven by local competition, and we have very limited store overlap. As evidence of our confidence in and commitment to closing this transaction without delay, we are amending our merger agreement to provide for a commitment to divest as many stores as necessary to obtain antitrust clearance.”
Morgan Stanley & Co. LLC is serving as exclusive financial advisor to Family Dollar and Cleary Gottlieb Steen & Hamilton LLP is serving as legal counsel.