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Family Dollar Stores, Inc. today rejected Dollar General's $9.7 billion buyout bid, offered on Monday, citing "significant antitrust issues."
Instead, Charlotte-based Family Dollar said it will hold strong to its $74.50-per-share merger agreement with rival discounter Dollar Tree, announced late last month.
Following an antitrust analysis with its financial and legal advisors, Family Dollar concluded that merging the nation's two largest discount retailers would not satisfy necessary regulations and could not "be completed on the terms proposed," according to Family Dollar Chairman/CEO Howard R. Levine.
In a letter sent to the Family Dollar board of directors last night, Goodlettsville, Tenn.-based Dollar General CEO Rick Dreiling stated that Levine expressed interest in helming the combined company, and Dollar General declining the request deterred Levine from pursuing the bid.
In a response, Levine stated, "I would also like to note that Dollar General’s letter… contained blatant mischaracterizations and did nothing to address the antitrust issues in Dollar General’s proposal.”
Ed Garden, partner at Trian Fund Management, L.P., a large shareholder of Family Dollar, further confirmed that Dreiling "said he believes that antitrust is not a risk but did not put forth a proposal that eliminates regulatory risk for Family Dollar shareholders," noting that the company would not allow a transaction carrying such risk to threaten the Dollar Tree deal.
An 'unpleasant' takeover attempt
Echoing the ongoing saga between the leadership factions at Market Basket, the letter and rebuttal between Dreiling and Levine could signal a "protracted and potentially unpleasant takeover attempt," according to Planet Retail Research Director Kelly Tackett.
"Family Dollar’s comments about regulatory concerns aren’t unfounded, and it’s unlikely that the any tie-up with Dollar General would result in the divestiture of only 700 stores," she said.
"The longer it takes for the final deal to be determined," Tackett concluded, "the more likely the retailers will lose focus on day-to-day operations, making other retailers targeting the same discount shopper the real winners in the battle for Family Dollar."
Family Dollar and Dollar General have engaged in a number of discussions since February 2013 regarding a potential merger agreement. Neither company was available for comment.