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Dollar General Ups Bid


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The Dollar General Corporation has announced their raising of the bid for Family Dollar to 9.1 billion dollars. Dollar General, which is the number one deep discount retailer in the US has announced that they would also pay a breaking up fee worth 500 million dollars if the deal were to go afoul due to complication with the law. This latest move by Dollar General is to assure that their purchase proposal succeeds, where it had failed in early July with the 8.95 billion dollar cash offer.

Family Dollardollar general 2

All of the excitement comes out of the original bid made by Dollar Tree to purchase Family Dollar. As of ¬†Tuesday, Family Dollar has said that while they remain committed to the original Dollar Tree deal, they would in fact review the bid that has been introduced by Dollar General. Family Dollars stock prices hit an all time high of $80.97 which was higher than the bid offered by Dollar General which equates out to roughly 80 dollars per share. The Dollar General bid not only helped to raise the jump in value of Family Dollar’s shares but also has given investors the hope that further bid attempts would only sweeten the future for higher offers or better buyouts.

Timing is Key

The timing of this newer bid comes at a time of great crisis for many of the national dollar store chains. Dollar General, Family Dollar, and Dollar tree are all suffering from the same ailment of discount retailers with heavy competition from Wal-Mart and Target. The larger national stores have become a nuisance to the dollar chains by providing more selection at competitive prices affecting much of the same customers that show at both types of locations. If Family Dollar were to merge right now with either of the two bidding companies, that set up would provide one of the industry’s best chances to fight back against giants like Wal-Mart and Target. A merger would give the Family Dollar and other company a better chance to nationally take on the competition while forcing Wal-Mart to either give up on its plans for small center stores or speed them up.

Dollar General to Close Storesdollar general

If in fact the Family Dollar and Dollar General merge were to go forward, Dollar General has already announced that the company is more than willing to sell up to 1,500 stores in order to clean up any type of anti-trust issues that might come up. The proposal of 1,500 stores comes less of a shock as the company has already committed to doing everything in its power to make sure that a merger would occur as easy as possible. Dollar General took it a step further and hired a former director at the Bureau of Competition, Richard Feinstein who previously worked for the Federal Trade Commission in an effort to ensure all aspects of the legality are to be met well within federal regulation. Other than satisfying any claims or issues with antitrust concerns, if the company were to merge they could quite possibly offer their customers a more constant low price guarantee that could outperform that of Target and Wal-Mart.

The Dollar Tree Proposal

Out of everything that is going on between the initial bid and now the rival bid, when comparing both bids it is clear that the Dollar Tree proposal offers a better deal to the Family Dollar board and investors. If Dollar Tree were to be the company that merged with Family Dollar, it deal would allow the son of the original founder, Howard Levine to remain in charge as the CEO. If Dollar General were to take over, it is expected that the CEO would lose his job and would have to relinquish any control over the day to day business of the company but on the other hand, he is expected to make out 745 million dollars for his whopping 9.3 million shares. Levine would also be able to earn an annual salary of at the very least 1.2 million dollars. If Family Dollar were to accept the Dollar Tree proposal, Levine would lose roughly 50 million dollars due to the stock and cash offer made by the company.

Family Dollar will ultimately make a decision based on the best interests of the company for the long term. That decision will affect both the industry competitors and the consumer base which relies on these retailers for deep discounts. With this new and latest bid, Dollar General has positioned itself to beat out Dollar Tree and become the leading company to merge with Family Dollar and solidify its place for years to come. If successful the Dollar General Family Dollar brand would be able to take on Wal-Mart and Target’s control as industry retail giants.

 

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