Family Dollar Rejects Takeover Bid by Dollar General
Family Dollar on Thursday rejected an $8.9 billion takeover bid by Dollar General, arguing that the offer bears the risk of being rejected by antitrust regulators.
Instead, Family Dollar is holding firm to its earlier $8.5 billion merger bid with Dollar Tree, a smaller competitor in the deep-discount retail space.
The move sets up a potential battle for control of one of the country's biggest dollar discount stores, as retailers seek to cater to America's working poor.
In its announcement on Thursday, Family Dollar brushed aside accusations by Dollar General that its chief executive, Howard Levine, was uninterested in a deal because he might lose his job. Instead, it focused on what it described as unacceptable antitrust risk from putting together two of the biggest dollar stores in the country.
Family Dollar acknowledged that it had held talks with Dollar General several times over the past year and a half. During that time, its advisers were studying - and becoming more convinced - that a union would not pass regulatory muster. Compounding matters, Dollar General declined to attend a meeting in June to discuss antitrust issues.
By the time the two sides met again, on June 19, Dollar General expressed no interest in pursuing a deal. And Family Dollar had by then signed a nondisclosure agreement with Dollar Tree that prevented any mention of their deal talks.
The merger of Family Dollar and Dollar Tree was then announced in July.
'Our board reviewed, with our advisers, all aspects of Dollar General's proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed,' Mr. Levine said in a statement. 'Accordingly, our board rejects Dollar General's proposal and reaffirms its support for the pending merger with Dollar Tree.'
Family Dollar said that its decision to reject the newer entreaty was backed by four independent directors, including Edward Garden, an executive at Trian Fund Management, the hedge fund run by Nelson Peltz.
Support by Mr. Peltz's firm for the Dollar Tree bid may blunt some criticism from Family Dollar shareholders that the company was ignoring a higher-priced takeover bid. The billionaire Carl C. Icahn has criticized Mr. Levine and his management team for ignoring the best interests of shareholders in their decision.
'Given the significant antitrust issues involved with Dollar General's proposal, we will not jeopardize the Dollar Tree deal for a transaction with Dollar General that has a high likelihood of not closing due to antitrust considerations,' Mr. Garden said.
Morgan Stanley and the law firm Cleary Gottlieb Steen & Hamilton are advising Family Dollar.
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