Discount retailer Family Dollar asked its shareholders on Monday to vote in favor of the $8.5 billion takeover offer from smaller rival Dollar Tree, despite the higher bid from Dollar General.
In a letter to shareholders, Family dollar said that Dollar General’s offer is unlikely to get approved by the Federal Trade Commission, while the bid from Dollar Tree would almost certainly get antitrust clearance.
Family Dollar outlined the difficulties that Dollar General would have to surpass in order to get regulatory approval. The company cited information provided by the FTC on January 10, showing that Dollar Generals unsolicited bid includes between 3 500 to 4 000 “presumptively problematic” stores.
Family Dollar also pointed out that Dollar General stands firm on its offer to divest up to 1 500 stores and its projection that the FTC would require less than 700 store closures.
Meanwhile, the deal with Dollar Tree has only 310 “presumptively problematic” according to FTCs latest economic analysis, Familly Dollar said, while also adding that both companies have projected that the number of store closures is to be reduced by government officials.
Dollar Tree, which had around 5 200 stores spread in the US and Canada by the end of October, released a statement on Monday, saying that it expects to reach an agreement with the FTC by the end of the month.
The company also said it estimated that less than 300 stores would be divested in order to get approval. Dollar Tree has potential buyers lined up to acquire its unneeded stores and it is ready to present them to the FTC, the company said.
The shareholder vote scheduled on January 22 has been pushed back twice already and Dollar Tree said it would not agree to any further adjournments. The company projected that if the votes goes in its favor, the acquisition would be completed in March at the earliest.
“It is imperative that the shareholder vote on the merger be held on January 22, both to eliminate the uncertainty that is continuing to damage Family Dollar’s business and because Dollar Tree’s financing costs go up substantially after that date,” Dollar Trees CEO Bob Sasser said in a letter, cited by Family Dollar.
“After two delays, we have been more than reasonable but have reached the end of our patience,” Mr. Sasser added.
Family Dollar lost 0.66% on Friday and closed at $77.99 in New York. On Monday the stock fell 1.42% to trade at $76.88 at 15:08 GMT, marking one-year increase of 14.64%. The company is valued at $8.93 billion.
According to CNN Money, the 14 analysts offering 12-month price forecasts for Family Dollar Stores Inc have a median target of $78.25, with a high estimate of $85.00 and a low estimate of $52.00. The median estimate represents a 1.03% increase from the last close price.
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