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An offer Family Dollar can’t refuse


The Family Dollar board is under new pressure to walk away from a deal with Dollar Tree after Dollar General further increased an already more generous counter offer.

Early Monday Dollar General increased its all cash offer to $80 a share from $78.50 a share and increased the number of stores it said it would be willing to divest to 1,500 from 700. The company also said it would be willing to pay Family Dollar a $500 million reverse break-up if the deal failed to secure antitrust clearance.

Family Dollar already has an acquisition deal in place with Dollar Tree for $74.50 a share, consisting of $59.60 in cash and $14.90 in Dollar Tree shares. While Dollar General’s initial proposal was richer and all cash, concerns surfaced that regulatory approval could be an issue even though Dollar General indicated it would divest up to 700 locations.

“We are confident that our enhanced proposal sufficiently addresses any concerns that led Family Dollar’s board of directors to reject our prior proposal without any discussions between our companies,” said Rick Dreiling, Dollar General’s chairman and CEO. “Even as a secondary antitrust review supported our previous proposal, we revised our offer to demonstrate the seriousness of our commitment. Our revised proposal provides Family Dollar shareholders with significantly increased value over the existing agreement with Dollar Tree, as well as immediate and certain liquidity for their shares. If the Family Dollar Board fails to seize this opportunity to maximize value for its shareholders, we will consider taking our superior proposal directly to the Family Dollar shareholders.”

Dollar General believed its earlier 700 store divestiture commitment would have been sufficient to clear any review by the Federal Trade Commission and suggested those analyzing the deal on behalf of Family Dollar are using a flawed methodology.

“Perhaps Family Dollar’s advisors are analyzing this transaction as if it were a potential grocery store merger or utilizing data that tells a story much different than Dollar General's documents and data,” according to a Dollar General statement. “Dollar General is confident that this matter would not be evaluated as a traditional grocery store merger and that, as the acquirer, Dollar General’s documents and data would be more important to the FTC in its analysis than those of Family Dollar.”

Those documents indicate that Dollar General is more concerned about competition from Walmart than Family Dollar and it makes pricing decisions accordingly.

In a letter to the Family Dollar board, Dreiling expressed disappointment that the Dollar General’s earlier bid was rejected without any conversations but said the company was committed to the deal. The company took the added measure of engaging Richard Feinstein of Boies, Schiller & Flexner to independently review the company’s earlier antitrust analysis. Feinstein led the FTCS Bureau of Competition until 2013 and determined the deal can be completed on the company’s initial terms.

“We look forward to the time when our companies and their advisors are able to discuss these matters more openly with one another once you have taken the appropriate steps under your existing merger agreement to allow that to happen,” Dreiling said. “Only by engaging with us can you ensure that you have fulfilled your duty to your shareholders to be well-informed and that you have acted in the best interests of your shareholders to maximize the value of their shares.”

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