Dollar General share price down, Family Dollar advises shareholders against offer

Dollar General Corp, the largest discount retailer in the US, last week turned directly to Family Dollar shareholders with an acquisition bid. Now the board of Family Dollar issued a recommendation against the proposed deal, advising shareholders to reject Dollar Generals offer.

The move follows a heated exchange of offers, rejections and counter-offers, with the board of Family Dollar electing to bet on a lower-priced offer by Dollar Tree, saying it would more likely receive regulatory approval.

“Our Board of Directors concluded unanimously that this highly conditional Offer is illusory,” Howard R. Levine , Chairman and CEO of Family Dollar, said. “Tenders into the Dollar General Offer will be meaningless since there is no way that Dollar General can purchase shares that are tendered.”There is a very real and material risk that the transaction proposed by Dollar General would fail to close, after a lengthy and disruptive review process.”

Dollar Generals tender bid is the same as the previous one and offers $80.00 per Family Dollar share in cash, and constitutes a ~$640 million premium to Dollar Tree’s bid, as well as 31.9% premium to Family Dollar’s value as of late July, before the acquisition talks began.

Dollar General had again expressed readiness to divest up to 1 500 stores, should the Federal Trade Commission require it in order to forward and approve an acquisition deal. Additionally, DG again said it would pay a $500 million reverse break-up fee if the deal did not close on antitrust disapproval.

“Our Board reaffirmed its support of the transaction with Dollar Tree, which delivers attractive value in the form of immediate upfront cash, as well as closing certainty,” Levine added.

Dollar General Corp was down 0.16% at session start to trade at $63.76 per share, valuing the company at $19.34bn. The stock is up 11.06% on an annual basis and is set to further rise. 19 analysts at the Financial Times offering 12-month price targets for Dollar General Corp. have a median target of $73.00, with a high estimate of $81.00 and a low estimate of $58.00. The median estimate represents a 14.31% increase from the last price of $63.86.