Dollar General Starts Bidding War with Dollar Tree for Family Dollar

Dollar General Starts Bidding War with Dollar Tree for Family Dollar
Image: Pixabay
August 18, 2014

Family Dollar is looking for a buyer and competitor Dollar General has put in a $9.7 billion cash offer for the floundering retailer.

At the end of July, Dollar Tree committed to buy Family Dollar for $8.5 billion in cash and stock. If Family Dollar breaks its deal, the Charlotte-based Dollar General will also pay the $305 million cancellation fee.

Dollar General is proposing $78.50 per share whereas Dollar Tree offered $74.50.

"We were surprised and disappointed to find out you had entered into a merger agreement with Dollar Tree," wrote Dollar General Chairman and CEO Rick Dreiling in a letter to the Family Dollar Board of Directors.

Under the Dollar Tree deal, Family Dollar will continue to operate under its current name and offer products at a variety of market-rate and discounted prices. The merger is intended to expand Dollar Tree's consumer base, as Family Dollar tends to operate in low-income urban and rural areas, while Dollar Tree caters to a more affluent suburban audience.

Dollar General has said it would be willing to sell 700 stores to ease antitrust concerns. The merger would general $550 million to $600 million in cost savings for Dollar General, which would now have almost 20,000 stories and more than $28 billion in revenue.

Like Family Dollar, Dollar General sells its merchandise for a discounted rate, whereas Dollar Tree sells its merchandise for $1 or less.

Update: In a statement released Monday afternoon, Family Dollar, "in consultation with its legal and financial advisors, will carefully review and consider the proposal."

The company will not provide any additional comments until after the Board of Directors has finished its review.