Dollar General makes $9.7bn counter-bid for Family Dollar

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br General-Family Dollar Associated Press Family Dollar's store on Plaza Boulevard in Kinston, North Carolina, caters to low-income shoppers seeking bargains. A bidding war for the discount chain has erupted, with Dollar General offering about $1 billion more than Dollar Tree's agreed takeover bid. Photo: AP

Robert Valpuesta London

DOLLAR General has offered $9.7 billion (R103bn) for Family Dollar Stores, challenging Dollar Tree’s agreed $8.5bn takeover of the US discount retailer.

Dollar General planned to pay $78.50 a share in cash, compared with Dollar Tree’s bid of $74.50 a share in cash and stock, the company said yesterday in a statement. Dollar General forecast annual synergies of between $550 million and $600m three years after completion.

“We look forward to expeditiously entering into constructive discussions with Family Dollar in order to sign a definitive merger agreement,” Dollar General chief executive Richard Dreiling said.

If combined, Dollar General and Family Dollar would have about $28bn in annual revenue, Bloomberg data show.

With more similarities to Family Dollar, Dollar General might be able to extract even greater benefits from a takeover than Dollar Tree through cost cuts, Poonam Goyal, a senior retail analyst for Bloomberg Intelligence, said.

The proposed combination would add to earnings by a low double-digit percentage in the first full year, excluding implementation and transaction costs, Dollar General said.

The enlarged company would be prepared to sell as many as 700 stores to gain antitrust approval, according to the statement. Dollar General, which is being advised by Goldman Sachs, was “confident it can quickly and effectively address any potential antitrust issues”.

Family Dollar and Dollar Tree are the second- and third-biggest dollar-store chains in the US by number of outlets. Dollar General is the largest. Sales at the chains, which specialise in cheap household goods, have slowed since the US economy began improving and consumers became less focused on finding bargains. They are still outpacing bigger discount retailers such as Walmart and Target.

While Dollar Tree caters to middle-class consumers and sells most items for $1, the other chains both focus on low-income shoppers and offer more food at various price points. – Bloomberg

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