Family Dollar rejects Dollar General offer

Dollar General has been jilted by Family Dollar as the discounter has opted to hold firm with Dollar Tree’s $8.5 billion deal.

Family Dollar’s board cites “significant antitrust issues” related to the Dollar General offer given that two chains greatly overlap geographically. Early indications of the Dollar General / Family Dollar marriage would have forced the closing of at least 700 stores.

Dollar General management said Family Dollar CEO Howard Levine was being driven his own interest in his support of the Dollar Tree offer, not what is necessarily the best deal for shareholders.

The Dollar General offer of $8.95 billion was also favored by Wall Street and outspoken investors like Carl Icahn, citing the loss of a $300 million break up fee offered by Dollar General.

Dollar General and Family Dollar execs acknowledged the two retailers discussed a possible merger for the past 18 months but Family Dollar executives said Thursday (Aug. 21) that advisers in the matter did not believe such a deal would pass regulatory muster.

Family Dollar then signed a nondisclosure agreement with Dollar Tree that prevented any mention of their deal talks shortly after. The merger of Family Dollar and Dollar Tree was then announced in July.

Shares of Family Dollar were trading at $79.70, down 10 cents on the news. Dollar General shares were down 30 cents, trading at $63.46 in the morning session. Dollar Tree shares slid 72 cents to $54.27 on lower earnings related to its planned acquisition costs of Family Dollar.

Dollar Tree earned $121.5 million or 59 cents a share in the quarter ending Aug. 2, and reported Thursday. This compared to $124.7 million or 56 cents per share a year ago. Excluding the buyout costs of Family Dollar, the company said it earned 61 cents per share still short of the 64-cent Wall Street consensus.

Dollar Tree revenue rose 9.5% to $2.03 billion, higher than Wall Street expectations of $2.01 billion.