Boston, MA 09/03/2014 (wallstreetpr) – Dollar General Corp proposed to acquire the Family Dollar Stores, Inc. (NYSE:FDO) for $8.95 billion of cash, but, Family Dollar rejected the initial offer.
Now, Dollar General Corp. (NYSE:DG) revised the offer price from $78.50 to $80.00 per share that raised the proposal value to $9.1 billion. It also warned to become hostile and directly approach the shareholders if Family Dollar rejects the new proposal.
In addition, the retailer also agreed to pay $500 million as reverse break-up fee related to antitrust approval.
Dollar General vs. Dollar Tree
In July 2014, Dollar Tree, Inc. (NASDAQ:DLTR) offered a proposal to acquire Family Dollar for $8.5 billion cash-and-stock. Family Dollar Stores, Inc. (NYSE:FDO) believes that the deal with the Dollar Tree will be good as its CEO, Howard Levine retains its position after the acquisition, who owns a majority of shares approximately 9.3 million shares ($745 million) as of July 2014. Trian Fund Management LP is the second biggest owners in Family Dollar.
In contrast, Dollar General Corp. (NYSE:DG)’s revised proposal will offer additional value of $640 million to Family Dollar’s shareholders than Dollar Tree that represented ~32% premium over the closing price $60.66.
But, Family Dollar Stores, Inc. (NYSE:FDO)’s CEO perhaps loses his job if the acquisition made by Dollar General. The Company board said that they will review the new proposal from Dollar General and needed to justify if they reject the revised offer.
Family Dollar chains already witness the performance pressure as there is no growth in gross margin and also experiences competition from small-format stores of Wal-Mart Stores, Inc. (NYSE:WMT) So, the deal may create a negative impact over its shareholders.
Even, Wolfe Research also said the merger between Family Dollar Stores, Inc. (NYSE:FDO) and Dollar General will help to retain its competitive position with Wal-Mart Stores, Inc. (NYSE:WMT) and provide market share gain in discount stores. It will also offer goods at multiple price points compared to Dollar Tree, Inc. (NASDAQ:DLTR), which sticks to lower price format of $1 or less.