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Summary

  • Dollar General tops its previous all-cash bid at $78.50 with an $80 bid.
  • This adds confidence to my theory that Dollar General fears a Dollar Tree merger with Family Dollar.
  • I was expecting a higher offer and continue to expect a still high offer to possibly come.

In my previous Dollar General (NYSE:DG) article entitled Is Fear The Real Reason Dollar General Wants Family Dollar?, I stated,

"My actionable advice? Consider buying Family Dollar. The bidding war heat may turn to fire. Worst case is the original Dollar Tree bid goes through and you have a single-digit percentage loss. Best case you see a much higher bid come in for Family Dollar when all is said and done."

Dollar General came out this morning with an $80 per share bid for Family Dollar (NYSE:FDO). Included with this increased offer from $78.50 is the paying of a $500 million termination fee with Dollar Tree (NASDAQ:DLTR) and a detailed plan to alleviate FTC antitrust concerns that some fear may come up. This includes the possibility of divesting up to 1,500 stores if need be. It had previously mentioned it was willing to divest up to 700 stores.

CEO Rick Dreiling stated,

"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."

He seems ready to fight and fight hard. Dollar General wants Family Dollar badly, and I believe at least part of this is due to continued fear of the alternative creating a powerful competitor that Dollar General doesn't want to have to deal with.

Source: Update: Dollar General Raises Its Bid For Family Dollar To $80 Per Share