Boston, MA 06/10/2014 (wallstreetpr) – A chain of retail discount store operator Family Dollar Stores, Inc. (NYSE:FDO) preferred the poison pill route to the onslaught of billionaire investor Carl Icahn’s threat of selling the company to Dollar General Corp. (NYSE:DG) by virtue of his holding in the company. As a fall out of the billionaire investor move, both the companies’ shares have witnessed hectic trading on Monday gaining significantly.
Shareholders’ Rights Plan
Family Dollar Stores, Inc. (NYSE:FDO) disclosed its board approval for a one-year shareholder rights issue to protect the company from any takeover threat through open market acquisition of shares without paying a premium for a controlling stake. This is applicable to all the shareholders of the company, whether they are current or future.
The company clarified that by adopting shareholder rights plan, the board wants to consider all options and alternatives and is not meant to thwart any takeover bid. The retailer believes that there will not be any impact on its financial reporting, as a result, of its rights plan.
The term ‘poison pill’ is used to deter a hostile takeover by issuing fresh shares thus diluting the potential bidder’s holdings in the event of exceeding a threshold limit.
Carl Icahnn’s Bid To Sell
Family Dollar’s latest move comes in the wake of billionaire investor threatening to sell the company to its rival Dollar General for $6.89 billion. He has acquired a beneficial stake of about 9.4% in Family Dollar Stores, Inc. (NYSE:FDO) through Icahn Capital LP. Following this, the company indicated that it was open to dialogue with the billionaire investor.
The latest move of Icahn follows after Family Dollar Stores, Inc. (NYSE:FDO) failed to arrest sliding sales and its announcement of shutting the doors of 370 stores in April thus slowing the company’s expansion of additional stores.
Icahn termed the company’s move as a damper and doubts whether it will help any friendly dialogue with Family Dollar’s management for a meaningful result.
Analyst Views
Looking at the developments, Jefferies & Co has boosted its rating to Buy on both Family Dollar Stores, Inc. (NYSE:FDO), as well as Dollar General Shares since any merger between them would allow synergy of $1.2 billion.
