Dollar General is taking its $9.1 billion bid directly to Family Dollar shareholders after being rejected twice earlier by its smaller rival. Fred Katayama reports.
The gloves are off. Dollar General is going hostile. After being rejected twice, it's taking its $9.1 billion offer for Family Dollar Stores right to the shareholders of its smaller rival. That's $600 million more than what Dollar Tree has offered in its friendly deal with Family Dollar. Family Dollar rebuffed Dollar General earlier over antitrust concerns. Dollar General is the largest among the dollar discount stores with 11,500 outlets, 3,300 more than Family Dollar. Dollar General says it's willing to sell up to 1500 stores to appease regulators and pay a $500 million break-up fee if the deal were to collapse. Dollar Tree, by contrast, has vowed to sell as many of its 5,100 stores as it takes to clear antitrust concerns. Family Dollar shares were up sharply in premarket trading but pared back much of those gains. Wolfe Research senior retail analyst Scott Mushkin says Family Dollar's antitrust concerns are overdone. He said, "Given the ubiquity of what is sold and the competition not only from Wal-Mart as well as the resurgent supermarkets, we are hard pressed to believe Dollar General will gain pricing power by merging with Family Dollar." Dollar for dollar, Raymond James believes Dollar Tree is better off if it loses the fight for what it considers an overvalued Family Dollar. That's because it'll pocket a big breakup fee and have a crack at buying the stores Dollar General will sell.