By Paul Ziobro
Dollar General Corp. is taking its $9.1 billion offer to buy
Family Dollar Stores Inc. directly to its rival's shareholders, in
an attempt to pull off a hostile takeover after its offer was
rejected by its target's board.
Dollar General, which formally announced the move Wednesday
morning, will tender to buy the company's shares for $80 apiece in
cash.
The move is aimed at persuading investors to turn down Family
Dollar's existing agreement to be bought by Dollar Tree Inc. for
$8.5 billion--an agreement Family Dollar's board continues to
support.
"Our offer provides Family Dollar shareholders with
significantly greater value than the existing agreement with Dollar
Tree," said Rick Dreiling, Chairman and Chief Executive Officer of
Dollar General. "By taking this step, we are providing all Family
Dollar shareholders a voice in this process, and we urge them to
tender into our offer."
Family Dollar and Dollar Tree couldn't be reached for
comment.
Dollar General's maneuver is not without its risks--because it
is offering to take over the company without having had access to
its confidential financial information. Launching the tender offer
will, however, allow Dollar General to start antitrust discussions
with the Federal Trade Commission, where it can determine how high
a hurdle it would have to clear to get a deal through, a person
familiar with the matter said.
Dollar General has said it would sell up to 1,500 stores
following a merger, although it believes it would have to divest
far fewer than that.
Family Dollar has said antitrust concerns are at the heart of
its decision to reject Dollar General's proposed merger. The two
chains run very similar businesses--selling a variety of consumable
and household products at a range of prices. Dollar Tree, by
contrast, sells everything at a dollar.
Family Dollar has said it has produced a mountain of evidence
for the FTC showing that Dollar General is a significant rival and
a factor in determining its prices. Among the findings: that prices
at far more than 1,500 Family Dollar stores are set solely on
whether a Dollar General store is nearby.
Both deals are aimed at consolidating the market for serving
low-income shoppers and building a stronger competitor to rivals
like Wal-Mart Stores Inc.
Dollar Tree said Friday that it would be willing to divest as
many stores as possible--or sensible--to get its deal done, and the
companies amended their merger agreement to reflect that
commitment. They said their deal could close by the end of
November.
Dollar General has been reluctant to include a similar provision
in its offer.
The chain and some antitrust attorneys have said the regulatory
concerns are overblown given the level of competition in retail and
recent approvals of mergers in the industry.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires