Boston, MA 09/29/2014 (wallstreetpr) – Dollar General Corp. (NYSE:DG) is getting frustrated after being turned away by Family Dollar Stores, Inc. (NYSE:FDO) even after tabling a much improved takeover bid of $9.1 billion in cash.
Antitrust regulators Concerns
Family Dollar is claiming that certain state attorney generals have notified it that it will be extremely difficult for the merger to go through because of its effects in terms of competition in the space. It is’ believed that a merger between the two companies would result in a combined entity that would suppress the level of competition in the low-end retail space.
Family Dollar Stores, Inc. (NYSE:FDO) is sticking to a lower bid of $8.5 billion from Dollar Tree, Inc. (NASDAQ:DLTR) as it remains confident the deal will gain the much-needed approval from antitrust regulators. Dollar General has resorted to negotiating directly with Family Dollar Stores, Inc. (NYSE:FDO)’s shareholders as it views its bid much superior in terms of valuation and shareholder value. Dollar General is aggressively pursuing Family Dollar after stating it would spinoff up to 1,500 stores as one of the ways of gaining the approval from regulators.
Increased Activist Investor Pressure
Dollar General Bid is an all cash deal compared to Dollar Tree’s bid of $8.5 billion which is made of $59.60 in cash and $14.90 in shares. Dollar General has already signaled it’s willingness to pay $500 million as a breakup fee for the merger between Family Dollar Stores, Inc. (NYSE:FDO) and Dollar tree if it is cleared by regulators.
Family Dollar Stores, Inc. (NYSE:FDO) was forced to put itself up for sale after experiencing a decline in sales as competition in the space continues to grow. The company has already resorted to cost cutting measures having closed a number of stores that were underperforming. It has also tried to reduce the prices of goods in stores as one of the ways of attracting more customers. The pressure for sale was’ also mounted by activist investor Carl Icahn, who has been pushing for the same.