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Dollar General Beats Family Dollar and Dollar Tree Put Together

Stocks in this article: DLTR FDO DG WMT

NEW YORK (TheStreet) -- A lot of investors are going to be taking a second look at the low, low end of retailing today with Dollar Tree's (DLTR) announced acquisition of Family Dollar (FDO)

Smart investors will ignore the hype and put some more money into Dollar General (DG).

Taken together, Dollar Tree and Family Dollar have quarterly sales of about $2.25 billion, with a little more than $150 million per quarter in net income and about $6.4 billion in assets. Dollar General, by itself, produced more than $4.52 billion in sales for its most recent quarter, with $222.4 million in net income on assets of $10.6 billion.

Read More: 10 Bricks-and-Mortar Stores That Beat Online

While Dollar Tree and Family Dollar appear similar -- they both have the word "dollar" in their names -- they are in fact quite different. Dollar Tree is a classic $1 store, with most merchandise priced at about $1. Family Dollar is a low-end general merchandise store, more like Dollar General.

The Deal's Jon Marino and Amanda Levin talk Dollar Tree and Family Dollar:

WATCH: More market update videos on TheStreet TV

If you were in Family Dollar, like Carl Icahn, you're making out like a bandit here. You're getting $59.60 in cash, just about what the shares were trading at Friday, and stock worth $14.90, a premium of 22.8%. But you're probably going to want to dump that stock as soon as you get it, again because of Dollar General.

Family Dollar also admits to being broken. CEO Howard Levine, who has run Family Dollar for a decade, admitted at an April investor conference: "We lost our way." This was followed by Icahn buying 9% of the common stock and demanding a sale. 

So Icahn will make out great in this deal. Will anyone else? I say it will be investors in Dollar General.

On my recent vacation I stopped to see relatives near Limon, Colo., who had a severe complaint for me. They were losing their old Family Dollar. Dollar General had opened up a unit there and blew the Family Dollar away. On another trip, to Mississippi, I found a friend who was driving 10 miles out of her way to shop at a small Dollar General, and avoiding a closer Walmart (WMT) whenever she could, because it was easier to get in and out.

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