Tags: Family Dollar | Dollar Tree | merger | antitrust

Family Dollar Judge Clears Way for Dollar Tree Buyout Vote

Saturday, 20 December 2014 05:03 AM

A judge refused to block Family Dollar Stores Inc. shareholders from voting on Dollar Tree Inc.’s $8.5 billion takeover bid until the discount retailer’s executives seriously weigh Dollar General Corp.’s offer in the takeover tussle over the seller of cut-rate diapers and toys.

The ruling clears the way for a Dec. 23 vote on the deal by Family Dollar investors. The purchase would create the largest U.S. discount chain by the number of stores, dominating a segment of retail that has generally prospered amid competition from online rivals and consumer restraint in the choppy economic recovery.

Family Dollar directors properly refused to negotiate with Dollar General about the rival retailer’s $80-a-share cash bid for the second-largest U.S. discount chain, and investors should be able to decide whether to take Dollar Tree’s cash-and-stock bid worth $74.50 a share, a Delaware Chancery Court Judge Andre Bouchard concluded today.

“The board has reasonably decided not to engage in discussions with General because General has not, in the board’s informed and good-faith judgment, offered better value” for Family Dollar investors, Bouchard said.

Nick Leasure, a spokesman for Family Dollar, said the company wouldn’t comment on the ruling. Shahed Larson, a Dollar General spokeswoman with the Brunswick Group, declined to comment on it.

Nathaniel Garnick, a Dollar Tree spokesman with Sard Verbinnen & Co., also said the company couldn’t comment on the ruling.

Business Models

Goodlettsville, Tennessee-based Dollar General fell $2.73, or 3.83 percent, to $68.56 in New York trading at 4:15 p.m.

Family Dollar, based in Matthews, North Carolina, fell less than 1 percent to $78.96 in New York. Chesapeake, Virginia-based Family Tree fell 41 cents to $68.70.

Family Dollar and Dollar General have similar business models, with the chains selling products at multiple prices and mostly catering to low-income shoppers. Dollar Tree attracts more middle-class consumers and sells most of its items for $1.

The Family Dollar bidding war began in July, when the company agreed to be acquired by Dollar Tree. That deal would merge the dollar-store market’s No. 2 and No. 3 companies, with about 8,000 and 5,300 stores, respectively. Dollar General then stepped in with an unsolicited bid, aiming to maintain its perch atop the industry.

Bid Increased

After that offer was rejected because of antitrust concerns, Dollar General executives bumped their bid to $80 a share in cash, or $9.1 billion. Along with the sweetened offer, it pledged to divest itself of as many as 1,500 of its 11,500 locations to placate regulators.

Family Dollar directors turned down that offer, and Dollar General executives responded by making a tender offer in September, saying its target was using antitrust concerns as a pretext to favor Dollar Tree’s inferior offer.

Family Dollar’s directors argued in court filings that they have acted reasonably in rejecting Dollar General’s offer and refusing to negotiate because of antitrust conflicts inherent in the proposed deal.

Disgruntled Family Dollar investors rejected that contention, saying that Dollar General failed to meet its legal duties to maximize the company’s value for shareholders.

In his ruling, Bouchard said Family Dollar directors were within their rights to rebuff Dollar General’s approaches given regulators’ antitrust concerns.

“The board’s decision reflects the reality that for the company’s shareholders, a financially superior offer on paper does not equate to a financially superior transaction in the real world if there is meaningful risks that the transaction will not close for antitrust reasons,” Bouchard wrote.

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A judge refused to block Family Dollar Stores shareholders from voting on Dollar Tree's $8.5 billion takeover bid until the discount retailer's executives seriously weigh Dollar General's offer.
Family Dollar, Dollar Tree, merger, antitrust
Saturday, 20 December 2014 05:03 AM
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