The financial war between the dollar stores took another turn on Friday when Family Dollar rejected the sweetened bid of $9.1 billion from Dollar General, citing concerns for antitrust.
Howard Levine, CEO of Family Dollar said that a review by board of directors of the firm concluded that there exists “a very real and material risk that the transaction proposed by Dollar General would fail to close, after a lengthy and disruptive review process.”
USA Today reported that Ed Garden, Family Dollar Director and Chief Investment Officer of the Trian Fund Management, an investor in Family Dollar said the offer, which was submitted on Monday, “does not eliminate regulatory risk for Family Dollar Shareholders.”
Matthews, Family Dollar based in North Carolina warned of the substantial risk that the Federal Trade Commission might assert the proposed deal would see US consumers pay higher prices.
Instead, Family Dollar reaffirmed the plans of completing the $8.5 billion stock and cash deal that will see it be sold to Dollar Tree. The $74.50 a share transaction is lower than the offer by Dollar General, which is $78.50 per share.
According to Bloomberg, once the offer was rejected, Dollar General raised the price to $80 per share cash. In addition to the new offer, Dollar General will sell about 1,500 locations and pay $500 million to Family Dollar if the deal does not get approval.
At 10:34 am New York time, Family Dollar’s stock dropped 1.3% to $79 and Dollar General fell 2.3% to $63.01. Chesapeake, Dollar Tree based in Virginia saw its shares rise to $55.19 by 0.3%.
Bloomberg Intelligence analyst Poonam Goyal said, “The only way this deal happens is if they give a blanket statement saying we’ll do what the FTC says or if they go directly to shareholders and shareholders decide if they themselves want to take the risk of the deal going through or not.”
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