In my previous Family Dollar (NYSE:FDO) and Dollar General (NYSE:DG) article entitled "Update: The Family Dollar Tug O' War Continues To Dollar General's Benefit," I made a case that the longer the delay, the better for any merger vote by FDO's shareholders to be bought out by Dollar Tree (NASDAQ:DLTR), or on the more lucrative DG offer. I stated, among other things:
"The longer the actual vote is delayed the better the odds for DG, as it can hopefully clear worry and risk with the FTC then make a more reasoned case why FDO shareholders should choose the more lucrative bid. With a just under $79 per share stock price, it shouldn't be a hard sell to take DG's $80 all-cash offer over a $74.50 partial-cash DLTR offer. Now according to a report by CNBC, "citing sources," the meeting on Dec. 23 will be immediately adjourned. Presumably the next meeting will be some time in January based on the past two-week delay, and this may buy just enough precious time DG needs."
Well, now the CNBC "sources" have been officially proven correct. FDO shareholders adjourned the meeting right at the beginning, but instead of by two weeks, the delay was by a full month. The vote was 72 million to 15 million shares, which also suggests the shareholder base may be more open to a DG buyout than the DLTR one. As I mentioned in my original article on the matter, I believe it's important for DG to win this buyout, not just from the synergy and efficiency standpoints of making the company much more profitable and valuable, but also from a strategic standpoint of stopping a great competitor like DLTR with a different concept from expanding further into DG's turf of higher-than-$1 price points. Again, my strategy remains: The way to play this is you're going to play this is on the long side of DG rather than FDO, as there is much more upside potential with the former. Again, even if DG loses the bid, the business is still doing amazingly well near-term, and it should restart its buyback program stronger than ever to make up for the lost time.
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