The Dollar Store Wars
Year
August 25, 2014
The saga continues for the dollar store wars. Family Dollar and Dollar General continue to question each other’s motives. Family Dollar claimed Dollar General expressed little interest in joining forces until the Dollar Tree deal was announced last month. Yet Dollar General claims Family Dollar was not fully transparent while seeking a unification, speculating that Family Dollar’s CEO Howard Levine, did not want the union because Dollar General did not want him taking the helm as combined CEO. Family Dollar claims they had talks with Dollar General as far back as early 2013, yet Dollar General reportedly did not have interest. All the while, thanks to non-disclosure agreements prohibiting the disclosure of existence of any discussions, Dollar Tree has worked their way into negotiations as
front runner. Dollar Stores are small box units built in simplistic shell design with dry good items shelf to shelf. Dollar General and Family Dollar offer items for $10 or less as Dollar Tree pushes product for just $1. The retailer lineup consists of low-priced inventory that caters to a blue-collar base still budgeting their disposal income because of the financial crisis. The dollar store space is fast gaining traction and seeking a more sizable framework as they dance the dance with bigger rivals like Wal-Mart. The latest Dollar General bid for Family Dollar was $78.50 per share in cash, topping the $74.50 cash and stock deal offered by Dollar Tree. In announcing its bid for Family Dollar, Dollar General said it was willing to shutter 700 stores to avoid any type of antitrust issues and clear the path for approval with regulators. Albeit analysts believe Dollar General is a better
fit, the Family Dollar legal team recently rejected Dollar General’s more generous offer, as they determined the proposal from fails to satisfy antitrust requirements. A couple of excerpts as it relates to the latest:
• “Family Dollar Stores Inc. spurned a $9 billion offer from Dollar General Corp. in favor of a lower bid from Dollar Tree Inc., saying it was concerned the Dollar General deal wouldn’t be able to pass antitrust hurdles:
• “The board rejected the Dollar General proposal and reaffirmed last month’s pact to merge with Dollar Tree, according to a statement today from the Matthews, North Carolina-based company. Dollar Tree has agreed to pay about $8.5 billion, excluding debt.”
• “A Dollar Tree-led merger would still involve divesting stores to pacify regulators, though the company doesn’t expect to have to get r id of more than 500.”
What This Means to You:
Dollar Stores are taking business away from retail giants like Wal-Mart and others. We often notice dollar stores in small town Mid-America positioned as little fish in a big pond, yet they remain afloat as they target a broad base of budget conscious consumers. The merger of 2 of the big 3 could further fend off the competition with enough capacity to lure more bargain shoppers through their doors. We have seen a tale of two cities relevant to retail mergers in The past. A potential marriage is foreseeably groundbreaking for the retail arena. It will either create a masterful force that leads to potential dominance or a miscalculated folly that leads to possible demise.
“Tell me and I forget. Teach me and I remember. Involve me and I learn.” – Benjamin Franklin
