Currently, Dollar General is offering $78.50 a share in cash for Family Dollar and is accusing the company of negotiating in bad faith on a $74.50 cash-and-stock takeover with Dollar Tree (DLTR) in late July. However, Trian Management's deep involvement in Family Dollar's sale process and the firm's support of its merger with Dollar Tree may prove a hurdle Dollar General will find hard to overcome.
Trian Management was given a seat on Family Dollar's board in late 2011, as the discount retailer struggled to keep pace with its closest competitor Dollar General. When Family Dollar formally launched a strategic review in January and hired Morgan Stanley as an adviser, Trian Management executive Ed Garden was included in a four-person board committee to run the review.
Proxy documents released by Family Dollar earlier in August show that Family Dollar did reach out to Dollar General multiple times about a merger, and that the company did significant analysis on antitrust issues involved in a potential deal. As Family Dollar's strategic review progressed, Dollar Tree emerged as an interested buyer who was willing to move expediently toward a deal.
By April 7, Family Dollar and Dollar Tree signed a non-disclosure agreement on a potential deal. That same day, activist investor Carl Icahn began buying Family Dollar shares. Between April and Family Dollar's formal announcement of a merger with Dollar Tree, there has been a significant back-and-forth between the company and its investors, and with prospective buyers such as Dollar General.