Dollar discounters fight new business formation

Minnesota shoppers, in addition to stockholders, are awaiting the outcome of a takeover battle between Dollar General, Corp., and Dollar Tree, Inc., over acquiring Family Dollar Stores, Inc. If there is a successful business formation of these retailers, Dollar General and Family Dollar would have approximately $28 billion in annual revenue

Dollar General offered $9.7 billion for Family Dollar Stores. This challenged Dollar Tree’s earlier $8.5 billion tender. Dollar General intends to pay $78.50 per share in cash as compared to Dollar Tree’s bid of $74.50 per share in cash and stock.

A senior analyst for Bloomberg Intelligence contends that a Dollar General may be able to obtain greater benefits from a takeover of Family Dollar through costs cuts because of the similarities between those companies. Dollar General claims that the proposed combination would increase earnings by a low double-percentage, excluding implementation and transaction costs, in the first full year.

Family Dollar and Dollar Tree are the second and third dollar-store chains, according to the number of outlets, and follow Dollar General as the largest in the nation. These chains specialize in sales of inexpensive household goods, mostly for $1, to middleclass consumers. Since the American economy has improved, sales have slowed at these retailers as shoppers are becoming less interested in finding bargains. These merchants, however, are outpacing bigger discount retailers, including Wal-Mart and Target.

If enlarged, the new company may have to sell at least 700 stores to obtain antitrust approval. Dollar General is being advised by Goldman Sachs Group, Inc., and claims that it can overcome any potential antitrust issues.

Regulatory compliance and knowledge of the myriad of laws governing mergers and acquisitions are the foundation for successful corporate growth. Legal representation can navigate businesses through these issues.

Source: Bloomberg, “Dollar General Makes $9.7 billion Family Dollar Counterbid,” Robert Valpuesta, Aug. 18, 2014

Source: Bloomberg, “Dollar General Makes $9.7 billion Family Dollar Counterbid,” Robert Valpuesta, Aug. 18, 2014

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