Dollar General Ups The Ante in Family Dollar Pursuit

NEW YORK (The Deal) -- Dollar General (DG)  said Tuesday that it has raised its bid for Family Dollar Stores (FDO)  to $80 per share and is threatening to take its latest offer straight to shareholders if Family Dollar refuses to engage in active deal talks.

TheStreet's Brittany Umar has details on Dollar General's latest bid for Family Dollar:


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Dollar General's revised bid is valued at around $9.1 billion, up from its last $78.50 per share offer, and far surpassing Dollar Tree (DLTR) 's $74.50 per share bid.

"In the event you refuse to engage with us regarding our revised proposal, we will consider taking our persuasive and superior proposal directly to your shareholders," Dollar General chairman and CEO Rick Dreiling said in a statement.

Dollar General is addressing some of Family Dollar's antitrust concerns by agreeing to divest up to 1,500 stores and noted it will pay a $500 million reverse breakup fee if the proposed deal does not meet regulatory standards. The company originally said it would be willing to divest up to 700 stores, if needed. Chesapeake, Va.-based Dollar Tree is entitled to a $305 million termination fee if Dollar General succeeds with its offer.

Family Dollar chairman and CEO Howard Levine said that Dollar General's original proposal did not do much to address key Federal Trade Commission issues, even though Dollar Tree said it would only divest 500 stores, if required.

Dollar General, of Goodlettsville, Tenn., and Charlotte, N.C.-based Family Dollar would have more than 20,000 stores if combined.

In addition to Simpson Thacher & Bartlett's Matt Reilly and Sara Razi, both of whom are former FTC employees, Dollar General has hired former FTC director Richard Feinstein of Boies Schiller & Flexner to help handle the regulatory hurdles.

One other matter that Dollar General pointed to that should allay some antitrust concerns is that the proposed merger should not be viewed as a traditional merger between two "stock-up" shops since Dollar General considers grocery stores, pharmacies and local independent retailers, as well as mass discount retailers, as its competitors, which factors into its pricing.

Dollar General went on to say that most of its customers visit these stores on a regular basis instead of making one stock-up trip.

"We are confident that our enhanced proposal sufficiently addresses any concerns that led Family Dollar's board of directors to reject our prior proposal without any discussions between our companies," Dreiling added.

Family Dollar acknowledged Tuesday morning that it received Dollar General's revised offer. The company said it would not comment until it is reviewed by its board and advisers. Family Dollar shares opened 50 cents higher, to $80.36 on Tuesday morning, with its market capitalization near $9.1 billion.

Dollar General shares opened 1% higher, to $64.65 on Tuesday morning, with its market cap near $19.6 billion.

Goldman Sachs (GS)  is Dollar General's financial adviser. Morgan Stanley  (MS) and Cleary Gottlieb Steen & Hamilton are advising Family Dollar.

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