Dollar General offers $80 per share, agrees to divest up to 1,500 stores if required.
Dollar General Corp. has sent an enhanced acquisition proposal to the Board of Directors of Family Dollar Stores Inc.
Under the terms of the revised proposal, Dollar General would increase its all-cash proposal for all outstanding shares of Family Dollar to $80 per share. To provide even greater certainty of consummation to the Family Dollar Board, Dollar General also increased the number of stores that it would be willing to agree to divest to 1,500 if ordered by the Federal Trade Commission (FTC) and, as further evidence of its confidence in its ability to obtain antitrust approval, has agreed to pay a $500 million reverse break-up fee to Family Dollar relating to antitrust matters. All other terms and conditions of the proposal remain unchanged.
Revised Transaction Terms
Dollar General’s revised proposal provides Family Dollar’s shareholders with approximately $640 million of additional aggregate value over Dollar Tree’s offer and represents a premium of 31.9% over the closing price of $60.66 for Family Dollar stock on the day prior to the Dollar Tree announcement.
Based on the extensive work and analysis performed by its experienced antitrust counsel and economist, Dollar General believes the 700 store divestiture commitment in its prior proposal provided more than sufficient cushion to clear any FTC review. Nonetheless, to demonstrate its commitment to the proposed transaction and the value it brings to Family Dollar shareholders, and to provide the Family Dollar Board with a proposal that indisputably permits it to engage with Dollar General under the terms of its existing merger agreement, Dollar General’s revised proposal states that it would be willing to agree to divest up to 1,500 stores, if ordered to do so. As further evidence of its confidence in its ability to obtain antitrust approvals, Dollar General also has agreed to pay a $500 million reverse break-up fee to Family Dollar in the event that the transaction is not completed for antitrust reasons.
Additional Antitrust Analysis
Dollar General began its antitrust analysis well over a year ago and, since making its proposal on Aug. 18, Dollar General has further refined its antitrust analysis with its counsel, Simpson Thacher & Bartlett LLP, and its economist, Compass Lexecon. This analysis has solidified Dollar General’s confidence in its ability to complete the potential transaction on the terms initially proposed.
In addition, Dollar General has engaged additional counsel, Boies, Schiller & Flexner LLP, to independently review its antitrust work. The independent review validated Dollar General’s analysis that the proposed transaction can be completed on the terms previously proposed.
Dollar General’s antitrust work has included all of the major analyses that would be performed by the FTC and its economist in connection with a review of this proposed transaction. Given Dollar General’s advisors’ experience, as well as the extensive analysis performed, the Company has the highest confidence that its antitrust analysis and conclusions are correct. This leads Dollar General to believe that perhaps Family Dollar’s advisors are analyzing this transaction as if it were a potential grocery store merger or utilizing data that tells a story much different than Dollar General’s documents and data. Dollar General is confident that this matter would not be evaluated as a traditional grocery store merger and that, as the acquirer, Dollar General’s documents and data would be more important to the FTC in its analysis than those of Family Dollar.
“We are confident that our enhanced proposal sufficiently addresses any concerns that led Family Dollar’s Board of Directors to reject our prior proposal without any discussions between our companies,” said Rick Dreiling, Dollar General’s chairman and CEO. “Even as a secondary antitrust review supported our previous proposal, we revised our offer to demonstrate the seriousness of our commitment. Our revised proposal provides Family Dollar shareholders with significantly increased value over the existing agreement with Dollar Tree, as well as immediate and certain liquidity for their shares. If the Family Dollar Board fails to seize this opportunity to maximize value for its shareholders, we will consider taking our superior proposal directly to the Family Dollar shareholders.”
Family Dollar Stores confirmed that it has received a revised, non-binding, unsolicited proposal from Dollar General to acquire all of the outstanding common shares of Family Dollar.
Consistent with its fiduciary duties and subject to the terms of its existing merger agreement with Dollar Tree Inc., Family Dollar’s Board of Directors, in consultation with its legal and financial advisors, will review and consider the revised proposal, the company said.
The Company’s Board of Directors has not changed its recommendation in support of the merger with Dollar Tree.
As announced on July 28, 2014, Family Dollar entered into a definitive merger agreement with Dollar Tree Inc., under which Dollar Tree would acquire Family Dollar in a cash and stock transaction. Under the terms of the agreement, Family Dollar shareholders would receive $59.60 in cash and $14.90 equivalent in Dollar Tree shares for each common share of Family Dollar owned, subject to a collar. At closing, Family Dollar shareholders would own no less than 12.7% and no more than 15.1% of the outstanding common stock of Dollar Tree.
