Dollar General issued a statement Thursday indicating the company is having trouble winning support from the Federal Trade Commission on a $9.1 billion bid for Family Dollar Stores.
Dollar General said it would “defend litigation” if necessary.
The statement could give new momentum to Dollar Tree's $8.5 billion cash and stock competing bid for Family Dollar. Meanwhile, two proxy investment firms have switched their recommendation for Family Dollar shareholders to accept the Dollar Tree offer, rather than the bid from Dollar General.
Glass Lewis & Co. and Institutional Shareholder Services both cited Dollar Tree’s bid as offering a greater likelihood of success, despite being lower.
“Overall, we agree with the board's determination that the merger with Dollar Tree delivers attractive value in the form of immediate upfront cash and upside participation in the combined company, as well as greater closing certainty,” Glass Lewis said in a statement. “We also continue to believe, as we have from the beginning, that a merger with Dollar Tree is strategically and financially compelling.”
Dollar General said its analysis of antitrust risks in a proposed takeover of Family Dollar differs significantly from the FTC. The statement casts doubt on whether Dollar General can rally investor support for its competing offer, or even bridge an apparent gap with regulators, just a week before Family Dollar shareholders are scheduled to vote on Dollar Tree’s offer.
Earlier in the week, Dollar Tree said that after consulting with antitrust regulators, it was confident that divestitures of overlapping stores between it and Family Dollar would only reach 310 stores in total. In contrast, guidance from the FTC indicated provided by Family Dollar indicated that that divestitures in Dollar General’s bid could reach as high as 4,000 stores, a far higher figure than the 1,500 closures that the company projected.
Dollar General said it expects to complete the FTC review by Feb. 10 and added that if given the opportunity to complete the process, store divestitures would not exceed estimates assumed in its $78 a share cash offer.