Dollar General offers $9.7 billion for Family Dollar, outbids Dollar Tree

Goodlettsville, Tenn. -- The battle between the extreme discounters is heating up: Dollar General Corp. said Monday it has made an all-cash bid of $9.7 billion for Family Dollar, topping a deal Dollar Tree made last month. Dollar General is bidding $78.50 per Family Dollar share, which includes a $2.26 per share premium over Family Dollar’s closing price on Friday. The offer is $4 higher per share than the $8.5 billion deal with Dollar Tree.



“For Family Dollar shareholders, our proposal is financially superior to the current transaction agreement with Dollar Tree and would provide Family Dollar shareholders with a substantial premium and immediate liquidity for their shares,” said Dollar General CEO Rick Dreiling in a statement. “For Dollar General shareholders, the proposed combination of Dollar General and Family Dollar would be a significant strategic opportunity to create immediate and lasting shareholder value. For both Dollar General and Family Dollar customers, we would be able to provide better value and greater selection.”



Dreiling said that he would postpone his announced retirement if the deal goes through.



The combined company would have nearly 20,000 stores in 46 states. Dollar General expects revenue would hit $28 billion and for the deal to generate synergies of $550 million to $600 million on an annual run-rate three years after the deal closes.



Dollar General said it has committed financing for the $9.7 billion deal from Goldman Sachs and Citigroup Global Markets, including a $305 million termination fee that would be due to Dollar Tree if Family Dollar accepts another offer. The company also said it is prepared to enter into a definitive merger agreement with Family Dollar that is essentially the same as the agreement the store now has with Dollar Tree altered to adjust for the higher price and the divestment of stores.



In a letter to Howard Levine, chairman of Family Dollar’s board, Dreiling wrote: “As you know, we at Dollar General admire your company and its attractive footprint and business prospects. We have respect for Family Dollar, its employees and its leadership, and both Dollar General and Family Dollar share a commitment to serving customers in the communities in which we operate. As such, we were surprised and disappointed to find out you had entered into a merger agreement with Dollar Tree.”