Family Dollar focus of hostile takeover bid

Dollar General is taking its fight for Family Dollar directly to the company’s shareholders, launching a hostile bid Wednesday that could circumvent Family Dollar’s reluctant board of directors and help Dollar General win antitrust approval for the deal.

Tennessee-based Dollar General made an $80-a-share, all-cash offer directly to Family Dollar’s shareholders. The move goes around Family Dollar’s board, which has twice rejected Dollar General. Family Dollar, based in suburban Charlotte, N.C., says the company’s $9.1 billion bid to acquire Family Dollar would be blocked by antitrust regulators.

Instead, Family Dollar’s board wants the company to be acquired by Virginia-based Dollar Tree, a smaller company that has said it would keep the Family Dollar brand, CEO Howard Levine and many of the company’s headquarters employees after the acquisition.

Dollar Tree’s offer of $74.50 in cash and stock totals $8.5 billion — about $640 million lower than Dollar General’s — but Family Dollar’s board has said the Federal Trade Commission is more likely to approve that deal.

Analysts said Wednesday that the deal will likely hinge on what federal regulators say, which will be crucial as shareholders weigh the competing offers.

Brian Yarbrough, an analyst with Edward Jones in St. Louis, said the decision could ultimately come down to how shareholders view the bids.

“Do the shareholders see it through Family Dollar’s eyes, or do they see it Dollar General’s way?” asked Yarbrough.

Analysts at the S&P credit rating agency said the hostile bid “furthers the uncertainty” around Family Dollar, and warned of a potentially drawn-out regulatory review and shareholder fight.

Dollar Tree has pledged to divest as many stores as necessary to win antitrust approval for the deal — a so-called “hell-or-high-water” provision — while Dollar General has said it will divest up to 1,500 stores.

But by making a tender offer, Dollar General CEO Rick Dreiling said his company will be able to start antitrust discussions with the FTC right away. That could give the company more leverage if regulators indicate they’re willing to approve the deal.