The winner is Walmart (WMT) .
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Dollar General's offer, which it's now taking directly to shareholders, is $80 in cash for each Family Dollar share, or $9.12 billion. That's for a company that was overpriced, in April, at $57.
Watch the video below for more on the battle of the dollar stores:
Family Dollar was overpriced then because Dollar General is winning in the marketplace. In small towns where Family Dollar opens a store and Dollar General comes in later, I have seen that the Family Dollar usually disappears quickly.
Both stores are simple cinder block structures built near the edge of town. They're not worth much empty, any more than the old downtowns they replace are worth much empty. Thus, Dollar General's offer to close up to 1,500 stores to appease regulators is also empty. It would probably be doing that anyway to avoid duplication.
As this battle has played out, retail investors have left both stocks. Family Dollar is now 91% owned by institutions; Dollar General is 90% owned by institutions. These guys are very likely to cheer the new offer. But where is the cash going to come from? Dollar General may have $10.82 billion in total assets, but only $3.14 billion are current assets and it has only $172.5 million in cash. Meanwhile, it has $2.98 billion in debt. Dollar General will have to issue new shares and/or take on more debt to make the purchase.