Business
U.S. retailer Dollar General Corp is preparing to go hostile as soon as this week in its bid to buy rival Family Dollar Stores , taking its $9.1 billion offer directly to shareholders after being spurned twice by its smaller rival, people familiar with the matter said on Tuesday. Reuters writes:
Dollar General could launch a tender offer for Family Dollar as soon as Wednesday, these people said, asking not to be named because the matter is not public.
Family Dollar, which already has a deal to sell to Dollar Tree Inc for $8.5 billion, has rejected Dollar General's unsolicited approaches citing antitrust risks.
Representatives for Dollar General and Family Dollar both declined to comment. Dollar General's expected hostile move could lead to a protracted takeover battle involving the nation's three largest U.S. dollar-store operators, at a time when these retailers are facing increasing competition from retailers like Wal-Mart and Target Corp.
In its most recent offer made last week, Dollar General had added a $500 million break-up fee and increased the number of stores it is willing to sell to get antitrust approval to 1,500 from 700. Dollar General believes these new terms eliminated the antitrust risk for Family Dollar, people familiar with the matter said.
But the rival rejected the sweetened bid, saying it still did not give the company sufficient protection.
Wal-Mart Stores Inc. may be the deciding factor in whether two of its discount rivals can merge. Bloomberg News writes:
Family Dollar Stores Inc. says Dollar General Corp.’s proposal to buy the company will have a tough time getting past regulators. Dollar General, whose interest in Family Dollar has been rebuffed twice, has data showing that its buyers shop at a range of rivals, especially Wal-Mart.
As a result, Dollar General looks at a broader landscape of retail competition, not just Family Dollar, when setting its prices, people with knowledge of the matter said, asking not to be identified discussing private information.
In fact, Dollar General could make a case that a combination of the two would prove a counterweight to the influence of the world’s largest retailer.
Competition with Wal-Mart and other discounters will be a key argument before the U.S. Federal Trade Commission if Dollar General decides to make a tender offer to supersede Dollar Tree Inc.’s $8.5 billion bid for Family Dollar.
The FTC will be trying to protect the low-income consumers who shop in discount stores.
