Boston, MA 08/19/2014 (wallstreetpr) – Dollar General Corp. (NYSE:DG) closed Monday trading session on a high of 11.63% after reports emerged, that showed it had tabled a $9.7 billion bid to acquire Family Dollar Stores, Inc. (NYSE:FDO). The bid is by far superior by $4 compared to Dollar Tree bid of $74.50 a share which was tabled’ in July. Dollar General has also agreed to pay the $305 million breakup fee that would be owed’ by Dollar Tree Inc. (NASDAQ:DLTR) should its bid be accepted.
Enhanced Shareholder Value
Dollar General Corp. (NYSE:DG)’s CEO has already stated that the deal if approved will result in a strategic opportunity able to create long lasting shareholder value for both companies. The combined entity will have approximately 20,000 stores in 46 states with Dollar General expecting sales of up to $28 billion annually. The proposal would also result in the nation’s biggest small box discount store.
The deal could, on the other hand, be beneficial to Dollar Tree in the sense that it will be paid up to $305 million in breakup fees. Regulators may also force Dollar General Corp. (NYSE:DG) to close some of its stores in areas where its merger with Family dollar may result in them commanding a huge market share. Closure of the stores may prompt Dollar Tree to make bids for them.
Combined sales of the Possible Merger
If Dollar Tree Inc. (NASDAQ:DLTR) were to merge with Family Dollar, combined sales would clock lows of $18 billion compared to highs of $28 billion between Dollar General and Family Dollar. Dollar General sluggish earnings last quarter, as well as weaknesses in its earnings estimates, force it to be ranked as a ‘Sell’ by Zacks research firm.
The battle for Family Dollar comes at a time that the discount industry is continuing to grapple with customer base that has not fully recovered from the economic crisis of 2008. Family Dollar Stores, Inc. (NYSE:FDO) has also had its rough patch in the market having announced a while back that it would close up to 370 of its underperforming stores after seeing its profit plummet by 30% in the second quarter.,