Dollar General says it may go hostile in its attempt to acquire Family dollar if its new offer which includes a higher price tag, a $500 million break-up payment, and a pledge to spin-off more stores is rejected by its smaller rival. Conway G. Gittens reports.
The battle among dollar retailers just became a little more expensive and threatens to get nasty. Dollar General is raising its already higher offer for Family Dollar to $9.1 billion from $8.95 billion and says it may bypass the Board and go directly to shareholders with a hostile takeover if the sweetened deal is panned. The No. 1 dollar store is digging in its heels after Family Dollar decided to go will a smaller $8.5 billion cash-and-stock offer from Dollar Tree. Looking to soothe worries the deal will be blocked in Washington, Dollar General is now willing to ditch up to 1,500 stores, up from 700 originally and will pay a $500 million break-up fee if regulators derail the deal for anti-competitive reasons. For RBC Capital Markets Scott Ciccarelli that break-up fee will be hard to ignore. He writes: "We think the FDO board will be under more pressure to engage with Dollar General, given the increased bid, the willingness to divest even more stores, and to pay a reverse breakup fee." Over at Sterne Agee, Charles Grom simply writes: "We believe that DG will win the asset, although we are unsure how the next steps will play out." Some investors are betting the next steps will include a higher offer - so shares of Family Dollar are climbing at the open, but so are shares of Dollar General. The third wheel in this story - Dollar Tree gaining as well.