Blog: Dean BestFamily Dollar dismisses Dollar General offer

Dean Best | 21 August 2014

The takeover battle for Family Dollar Stores has taken another twist, with the US retailer rejecting a takeover bid from rival Dollar General and in-the-spotlight CEO Howard Levine citing anti-trust concerns.

Dollar General bid US$9.7bn for Family Dollar earlier this week, trumping a US$9.2bn offer from a third discount retailer, Dollar Tree, which was tabled last month.

However, Family Dollar dismissed Dollar General's offer, insisting an "extensive anti-trust analysis" meant it believed a deal could not be done between the two companies on the terms put forward.

"Our board of directors, with the assistance of outside advisors and consultants, has been carefully analysing the anti-trust issues in a potential combination with Dollar General since the beginning of this year," Family Dollar CEO Howard Levine said.

"Our board reviewed, with our advisors, all aspects of Dollar General's proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed. Accordingly, our board rejects Dollar General's proposal and reaffirms its support for the pending merger with Dollar Tree."

Levine also issued a firm rebuttal against claims from Dollar General that he had ignored previous overtures from its latest suitor over fears of losing his job.

Dollar General claimed a recent filing from Family Dollar detailing the bid from Dollar Tree had "failed to mention that Dollar General representatives have consistently expressed a keen interest in putting our two companies together".

The filing "also fails to mention that on more than one occasion at such meetings, Howard Levine expressed his own interest in the social issues of a combination, including, among other things, his desire to be chief executive officer of the combined companies".

That shone the spotlight firmly on Levine, with a company's fidicuiary duty to maximise shareholder value seen as a key attribute of chief exeuctive.

Levine brushed off Dollar General's claims. "I would also like to note that Dollar General’s letter, sent late last night, contained blatant mischaracterisations and did nothing to address the antitrust issues in Dollar General’s proposal," he said today.

Family Dollar's opposition to the Dollar General bid has also been supported by major shareholder Trian Fund Management, the investment vehicle run by Nelson Peltz. 

"Consistent with its fiduciary duties, the company's board has sought to maximise shareholder value while considering the certainty of closing a transaction. The CEO of Dollar General said he believes that anti-trust is not a risk but did not put forth a proposal that eliminates regulatory risk for Family Dollar shareholders. Given the significant antitrust issues involved with Dollar General's proposal, we will not jeopardise the Dollar Tree deal for a transaction with Dollar General that has a high likelihood of not closing due to antitrust considerations. We remain fully committed to the Dollar Tree transaction."

Will Dollar General, which has pledged to offload up to 700 stores from the combined business, return to the table with revised offer?

Either way, FMCG manufacturers operating in the US are set to face, on paper, a stronger customer with which to do business, following other deals across the US grocery sector, including Albertsons' takeover of Safeway and Kroger's purchase of Harris Teeter.

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