Family Dollar Rejects Dollar General Takeover Bid On Antitrust Concerns

(RTTNews) - Family Dollar Stores, Inc. (FDO), one of the largest retail discount chain in the U.S., announced Thursday that its board has unanimously rejected the non-binding proposal made by larger discount retailer Dollar General Corp. (DG) on the basis of antitrust regulatory considerations. Meanwhile, the board unanimously reaffirmed its recommendation in support of the merger agreement with Dollar Tree, Inc. (DLTR).

The Family Dollar board, after consultation with its financial and legal advisors who have conducted an extensive antitrust analysis, determined that the Dollar General proposal fails to satisfy this requirement. The combination of Family Dollar and Dollar General would have created an entity of more than 20 thousand stores with presence in 46 states.

Dollar General, on this Monday made a superior all-cash proposal of $78.50 per share or $9.7 billion in total to acquire rival Family Dollar, thwarting Dollar Tree's $74.50 per share or $9.2 billion cash and stock deal to acquire Family Dollar Stores that was agreed up on in late July.

The same day, Family Dollar said it remains subject to the merger agreement with Dollar Tree, and the company's board of directors has not changed its recommendation in support of the merger with Dollar Tree.

It was on July 28, that Family Dollar entered into a definitive merger agreement with Dollar Tree, under which Dollar Tree would acquire Family Dollar for $59.60 in cash and $14.90 in Dollar Tree stock. The consideration represents a 22.8 percent premium over Family Dollar's closing price as of July 25.

Howard Levine, chairman and CEO of Family Dollar stated, "Our Board reviewed, with our advisors, all aspects of Dollar General's proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed. Accordingly, our Board rejects Dollar General's proposal and reaffirms its support for the pending merger with Dollar Tree."

Ed Garden, a co-founder and partner at Trian Fund Management, L.P., a large shareholder of the company said that Dollar General has a high likelihood of not closing the deal due to antitrust considerations.

Morgan Stanley & Co. LLC is serving as exclusive financial advisor to Family Dollar and Cleary Gottlieb Steen & Hamilton LLP is serving as legal counsel.

On June 19, activist investor Carl Icahn in a letter to Howard Levine, CEO of Family Dollar, urged the company be put up for sale immediately and to add three directors nominated by him to speed up the process. Carl Icahn's Icahn Capital LP had acquired a stake of about 9.4 percent in Family Dollar.

FDO is currently trading at $79.70, down 0.14 percent. DG trades down 0.13 percent at $63.67.

Dollar Tree is lower 1.98 percent and trades at $53.91.