Boston, MA 08/22/2014 (wallstreetpr) – Family Dollar Stores, Inc. (NYSE:FDO) told Dollar General Corp. (NYSE:DG), the bigger rival that is trying to have it for lunch, to keep its money because it was not going to accept it. The interesting thing is that in rejecting Dollar General’s offer, Family Dollar is committing to a smaller offer from Dollar Tree, Inc. (NASDAQ:DLTR). However, the board of directors of Family Dollar is convinced that they are performing their fiduciary duty by turning away a bigger bid for a smaller one.
Antitrust fears
In turning away Dollar General with their $8.95 billion buyout offer to instead commit to $8.5 billion from Dollar Tree, the board of Family Dollar Stores, Inc. (NYSE:FDO) evaluated the challenges and opportunities in agreeing to Dollar General’s terms. They found out that they were better off without it. They particularly cited potential regulatory approval challenges. They said that trying to team up Dollar General, with which they run the same retail concept, was unlikely to get antitrust approval compared with a deal with Dollar Tree.
Besides the antitrust issues, Family Dollar would have been required to part with about $300 million as a breakaway fee with Dollar Tree.
Divesting stores
The decision by Family Dollar Stores, Inc. (NYSE:FDO) to turn down the offer extended by Dollar General did not come as sweet music to the ears of Dollar General executive. DG’s CEO, Rick Dreiling, openly expressed dissatisfaction with Family Dollar’s behavior and said that in making a bid for the retailer, they had considered all the antitrust issues that might arise and were sure that the deal would go through. He said that they are still willing to negotiate and they would even be ready to divest several of their stores so as to win regulatory approval.
Dollar General’s bid of $8.95 billion valued Family Dollar Stores, Inc. (NYSE:FDO) at $78.50 a share. Dollar Tree’s $8.5 billion on the other hand valued Family Dollar at $74.50 billion and its offer includes cash and stock.
