Tallahassee Journal

Family Dollar CEO calls Dollar General offer ‘problematic’

Family Dollar CEO calls Dollar General offer ‘problematic’

The battle over dollar-store chain Family Dollar took an unexpected twist Monday as the chairman and CEO urged shareholders to accept a lower offer from rival Dollar Tree — or face the possibility of going it alone. Despite a higher bid from competitor Dollar General, Howard Levine urged Family Dollar shareholders to accept an $8.5 billion offer from smaller rival Dollar Tree, saying a union with Dollar General could be “problematic” for regulators.family-dollar

A merger with Dollar Tree, by contrast, is a “virtual certainty,” said Levine, who is the son of Family Dollar founder Leon Levine, A shareholder vote on Dollar Tree’s proposed buyout is scheduled for Jan. 22. Levine said his warning is based on new information from the Federal Trade Commission, which would have to approve any merger. Levine said FTC staff recently informed him that a merger with Dollar General would require the companies to divest 3,500 to 4,500 stores — well above the 1,500 stores that Dollar General has committed to divesting as part of the proposed merger.

As such, he wants shareholders to vote for the $8.5 billion offer from Dollar Tree over the $9.1 billion bid from Dollar General in order to ensure it gets bought. “We hope that Family Dollar’s shareholders decide to support Dollar Tree’s transaction, with the premium value, certainty, timing advantages and further upside it offers,” Levine said in an open letter to shareholders.

The CEO warned of dire consequences if shareholders choose to push Dollar Tree aside in hopes of more money from Dollar General. “If the Dollar Tree merger is not approved by Family Dollar stockholders, there is a significant risk that Family Dollar will be left without a merger partner,” he said. “Given the current challenging market conditions, there are significant risks and uncertainties to Family Dollar as a stand-alone company.”

Shares of Family Dollar fell on the news to 1.4% to $76.90 a share. Levine said both he and Nelson Peltz’s Trian Partners, the two largest Family Dollar stockholders, are both in favor of the merger with Dollar Tree over Dollar General.