By Paul Ziobro And Michael Calia
The battle of the dollar stores isn't over.
Shareholders of Family Dollar Stores Inc. delayed making a
decision on whether to accept an $8.5 billion buyout offer from
discounter Dollar Tree Inc., giving more time for rival Dollar
General Corp. to persuade Family Dollar to accept a higher bid.
This is the second time the vote has been pushed back.
Dollar General this summer offered to buy Family Dollar for $9.1
billion in cash but the offer has been in limbo amid concerns that
regulators would resist a pairing up of the country's two biggest
dollar stores and that Dollar General would be required to divest
more stores than it has offered.
To duck the regulatory risk, Family Dollar instead is sticking
by the lower cash-and-stock bid from Dollar Tree, which hasn't
capped the number of stores it would sell to complete the deal. And
those two chains have less overlap and different models. Family
Dollar sells consumables and household goods with most prices
running up to $10 an item--much like Dollar General--while Dollar
Tree mostly sticks to selling items at $1 each.
Family Dollar said it believes Dollar General's offer wouldn't
pass regulatory muster. According to documents filed in a recent
court case, the company's board had been advised that Dollar
General's offer had a 40% chance of being approved by antitrust
regulators as written.
The latest move was advocated by proxy adviser Institutional
Shareholder Services Inc., which urged Family Dollar investors to
delay a decision on the Dollar Tree deal as a "free option" to see
whether Dollar General could strike a deal with regulators or
otherwise improve its bid. The postponement also puts Dollar
General on a new 30-day clock to clear the antitrust hurdles and
potentially win over the Family Dollar board. With the stock price
around $79.32, above the Dollar Tree offer which Tuesday was worth
about $77 a share, Family Dollar shareholders are clearly banking
on a better outcome than the deal they have, whether that comes
from Dollar General or Dollar Tree.
The saga has been going on since the summer, when Dollar Tree
made a surprise offer, kicking off the bidding war in a slice of
the retail industry that has thrived in the sluggish economy. It
has also drawn interest from activist investors. Elliott Management
Corp. built up a stake in Family Dollar in the hopes that a deal
with Dollar General could happen. Meanwhile, Trian Fund Management
LP, which has an executive on Family Dollar's board, has backed the
Dollar Tree deal.
The FTC is reviewing the agreement between Family Dollar and
Dollar Tree--as well as Dollar General's offer. The regulators are
probing the similarities between the discount retailers' businesses
and whether any prospective deal would affect pricing as well as
competition.
Dollar Tree said earlier this month that it would need to divest
a "relatively small" number of stores to gain antitrust approval
for the deal, which could close in February. Dollar General week
delayed a planned update to shareholders on how talks with
regulators were progressing without providing a reason.
Three Family Dollar shareholders filed a lawsuit in a Delaware
court to stay Tuesday's vote, arguing that the company's board
should have at least engaged in talks with Dollar General. The
court denied the motion.
Family Dollar shareholders voted by a margin of 72 million
shares to 15 million shares to adjourn Tuesday's meeting and
another meeting was scheduled for Jan. 22. A prior meeting to vote
on the Dollar Tree deal had been rescheduled.
Chelsey Dulaney
contributed to this article.
Write to Paul Ziobro at Paul.Ziobro@wsj.com and Michael Calia at
michael.calia@wsj.com
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