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Dollar General Climbs Atop Dollar Tree

Stocks in this article: DG DLTR FDO GS C

NEW YORK (The Deal) -- Dollar General (DG)  has trumped Dollar Tree (DLTR) 's bid to acquire Family Dollar Stores  (FDO) by $4 per share on Monday, offering $78.50 per share in cash, giving the target a market capitalization of almost $8.95 billion.

Goodlettsville, Tenn.-based Dollar General made the offer to Family Dollar's board in a letter disclosed Monday.

The competing bid values the Charlotte, N.C.-based discounter at nearly $9.6 billion including cash and debt. Dollar General said in its announcement that its offer gave Family Dollar a $9.7 billion valuation.

Dollar General said that combining the two retailers would create a powerhouse with sales of over $28 billion and a chain of nearly 20,000 stores in 46 states, solidifying the acquirer's position as the largest dollar-themed retailer. It would also, importantly, generate cost-saving synergies of $550 million to $600 million per year after three years.

Dollar General said it can address any potential antitrust issues as a result of the transaction by divesting up to 700 stores to get approval.

Goldman Sachs (GS)  and Citigroup Global Markets (C)  have agreed to provide committed financing for the transaction, including the $305 million termination fee payable to Dollar Tree if Dollar General were to succeed with its own offer.

Dollar Tree's offer, which included a combination of stock and cash, valued Family Dollar at $74.50 per share, equating to a market cap of about $8.49 billion when taking into account the nearly 114 million shares outstanding.

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