Boston, MA 08/18/2014 (wallstreetpr) –A chain of discount retail store operator Dollar General Corp. (NYSE:DG)’s chairman and CEO, Rick Dreiling, said that it had presented a superior financial offer to a chain of general merchandise retail discount store operator Family Dollar Stores, Inc. (NYSE:FDO) than Dollar Tree, Inc. (NASDAQ:DLTR). The entry of Dollar General could mean that the bidding could escalate, and there would also be a potential war on pricing between Dollar General and Dollar Tree, which would only benefit Family Dollar Store shareholders.
CEO Comments
Dollar General Corp. (NYSE:DG)’s CEO, Rick Dreiling, also viewed that the combination of both the companies would offer significant, and lasting value to Family Dollar Stores, Inc. (NYSE:FDO)’s shareholders through tactical opportunities. He was also confident of providing better value to its shareholders by acquiring Family Dollar.
The company had entered the bidding fray by offering $78.50 in cash to Family Dollar on Monday morning. The transaction, if agreed, would be worth $9.7 billion. The offer price is $4 higher than Dollar Tree’s offer price of $74.50 a share on July 28, which will be in the form of both cash and stock, unlike Dollar General’s all cash offer. The transaction would have been valued $8.5 billion.
The CEO said that it was looking into striking a definitive deal to buy Family Dollar Stores through constructive discussions, which meant that Dollar General Corp. (NYSE:DG) would be open to price and other negotiations.
Tactical Gains
Dollar General Corp. (NYSE:DG) listed tactical gains in case the deal comes through. The company indicated that the merged entity would establish a preeminent position in the small-box retailer space in the U.S. merely on store locations. It could offer low prices everyday to attract customers from its close to 20K stores spread across 46 States, and the sales predicted to top $28 billion.
The company also believes that the proposal envisages $550 – $600 million of synergies on an annualized basis three years after the transaction is closed. This apart, it believes that low double-digit earnings accretive can be expected in the first full year of operations without including transaction and implementation costs.
