Family Dollar Rejects Dollar General Tender Offer, Supports Dollar Tree Deal

(RTTNews) - Discount retailer Family Dollar Stores, Inc. (FDO) Wednesday said its Board unanimously recommended that its shareholders reject the unsolicited conditional tender offer made by Dollar General Corp. (DG) and not tender their shares.

In conjunction with its rejection of Dollar General's offer, Family Dollar's Board unanimously reaffirmed its recommendation in support of the deal with Dollar Tree, Inc. (DLTR).

It was on July 28 that Dollar Tree agreed to acquire Matthews, North Carolina-based Family Dollar for $74.50 per share in a cash and stock deal valued at $9.2 billion. On August 18, Dollar General made a superior all-cash proposal of $78.50 per share or $9.7 billion to thwart the Dollar Tree bid.

On August 21, Family Dollar said its board unanimously rejected the non-binding proposal made by Dollar General on the basis of antitrust regulatory considerations. Family Dollar's board unanimously reaffirmed its recommendation in support of the merger agreement with Dollar Tree.

Following this, Dollar General sweetened its offer by $1.50 to $80.00 per share, and also raised the number of stores it was willing to divest if ordered by the Federal Trade Commission or FTC.

Dollar General said its offer represented a premium of 31.9 percent over the closing price of $60.66 for Family Dollar stock on the day prior to the announcement by Dollar Tree.

Further, on September 10, Dollar General said it has begun a tender offer to acquire all outstanding shares of Family Dollar for $80 per share in cash. Dollar General also said it would promptly file for clearance under the Hart-Scott-Rodino, or HSR Act, which would allow the company to begin the antitrust approval process with the FTC.

Family Dollar said today that the terms of the tender offer are the same as those in the proposal made by Dollar General on September 2, which Family Dollar's board unanimously rejected on September 5, on the basis of antitrust regulatory considerations.

Howard Levine, Chairman and CEO of Family Dollar, said, "Our Board of Directors, with the assistance of outside advisors and consultants, reviewed all aspects of Dollar General's tender offer and concluded unanimously that this highly conditional Offer is illusory because, as Dollar General is well aware, the Offer cannot close on the terms proposed. Tenders into the Dollar General Offer will be meaningless since there is no way that Dollar General can purchase shares that are tendered."

Ed Garden, a Family Dollar director and co-founder and Chief Investment Officer at Trian Fund Management, L.P., a large shareholder of the company, said Dollar General has repeatedly stated that antitrust is not a risk, yet they have put forth proposals that require Family Dollar shareholders to bear the ultimate risk.

He said receiving a reverse breakup fee with an after-tax value of less than $3 per share does virtually nothing to compensate the Family Dollar shareholders for assuming that risk.

FDO closed up 0.3 percent on Tuesday at $78.79, while DG was up 0.6 percent at $63.86. DLTR also settled higher by 0.2 percent at $55.73.