Family Dollar Stores, Inc. has announced that its board of directors had unanimously rejected a non-binding acquisition proposal made by Dollar General Corp. on the basis of antitrust regulatory considerations. The board also unanimously reaffirmed its recommendation in support of a previously proposed merger agreement with Dollar Tree, Inc.
Family Dollar said its board, with its financial and legal advisors, conducted an extensive antitrust analysis and determined that the Dollar General proposal failed to satisfy the requirement that it is reasonably likely to be completed on the terms proposed.
Howard Levine, Family Dollar chairman and CEO, said in announcing the board’s decision, “Our board of directors, with the assistance of outside advisors and consultants, has been carefully analyzing the antitrust issues in a potential combination with Dollar General since the beginning of this year, as detailed in the company’s preliminary proxy statement that was filed by Dollar Tree with the SEC on August 11. 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 asserted, “I would also like to note that Dollar General’s letter, sent late last night, contained blatant mischaracterizations and did nothing to address the antitrust issues in Dollar General’s proposal.”
Family Dollar stated that Ed Garden, a co-founder and partner at Trian Fund Management, L.P., a major company shareholder, commented, “Consistent with its fiduciary duties, the company’s board has sought to maximize shareholder value while considering the certainty of closing a transaction. The CEO of Dollar General said he believes that antitrust 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 jeopardize 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.”
In the proposal letter sent to Family Dollar’s CEO and its board on released by Dollar General on August 18, the company’s president and CEO Rick Dreiling wrote, “We have conducted a thorough review and analysis of the antitrust issues that may be raised by our proposed transaction, including engaging experienced antitrust counsel and a team from Compass Lexecon as our economist to assist us with our analysis. As a result of our review and analysis, coupled with the numerous econometric studies Compass Lexecon has performed utilizing extensive information and data supplied by Dollar General, we are prepared to commit to divest up to 700 retail stores in order to achieve the requisite antitrust approvals, which is approximately the same percentage of the total combined stores represented by the 500 store divestiture commitment in the Dollar Tree merger agreement. We are confident that, with this commitment, we will be able to quickly and efficiently resolve any potential antitrust issues and that our transaction is capable of being completed.”
In a statement, also released today, Dreiling stated, “We are disappointed that the Family Dollar board of directors has concluded that our proposal is not reasonably expected to lead to a superior proposal without informing itself of all relevant information. We have done extensive antitrust analysis using experienced advisers, the results of which confirm that the transaction as proposed is capable of being completed. We remain willing to share this analysis with Family Dollar and its counsel and are confident that we will be able to quickly and efficiently resolve any potential antitrust issues. We are carefully reviewing and considering our options. Our existing all-cash proposal coupled with manageable antitrust issues continues to make our proposal superior to the current transaction agreement with Dollar Tree.”