Update: Dollar General Raises Bid For Family Dollar, Threatens Hostile Takeover

Sep. 2.14 | About: Family Dollar (FDO)


Dollar General has raised its bid for Family Dollar, moving to $80 per share, up from its original offer of $78.50 per share and over Dollar Tree’s earlier offer.

In a previous article, I predicted that Dollar General’s efforts could push Family Dollar’s share price higher.

Today’s event confirms that opinion and the deal isn’t settled yet.

Dollar General (NYSE:DG) has boosted its bid for Family Dollar (NYSE:FDO), going from $78.50 per share to $80 per share - and the discount retailer isn't stopping there. According to the Wall Street Journal, Dollar General also "said it would be willing to divest itself of up to 1,500 stores if required to win antitrust approval and pay a $500 million fee if it couldn't get a deal past the Federal Trade Commission" but "warned it could try a hostile takeover if its rival's board doesn't agree to talks." While Family Dollar is still indicating that it prefers the offer by Dollar Tree (NASDAQ:DLTR) of $74.50 per share, the company did say that it would review Dollar General's revised offer.

I had anticipated that there may be some back and forth on bid prices for Family Dollar, which would help drive up the price. While I had not predicted that Family Dollar would reject Dollar General's bid, I wrote: "Dollar General would face significant hurdles in issuing a counterbid to Dollar Tree's offer for Family Dollar, but it isn't impossible. Family Dollar would be a more synergetic fit for Dollar General, and those synergies add value to the deal. Even if Dollar General does not ultimately succeed, its efforts could push Family Dollar's price much higher. It's not too late to buy in." (Read it here). Today's news confirms that.

Moreover, as noted previously, while Family Dollar CEO Howard Levine and activist hedge fund Trian Management are both on the side of Dollar Tree, there are those shareholders who believe Dollar Tree's offer is too low. In other words, if Dollar General is willing to pursue a hostile takeover, the company would find support.

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The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.