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Family Dollar Delays Merger Vote
From the Wall Street Journal of Tue, 23 Dec 2014 12:45:58 EST
Family Dollar shareholders have decided to postpone the vote on the Dollar Tree offer until Jan. 22.
Family Dollar shareholders have decided to postpone the vote on the Dollar Tree offer until Jan. 22. Bloomberg News

The battle of the dollar stores isn't over.

Shareholders of Family Dollar Stores Inc. delayed making a decision on whether to accept an $8.5 billion buyout offer from discounter Dollar Tree Inc., giving more time for rival Dollar General Corp. to persuade Family Dollar to accept a higher bid. This is the second time the vote has been pushed back.

Dollar General this summer offered to buy Family Dollar for $9.1 billion in cash but the offer has been in limbo amid concerns that regulators would resist a pairing up of the country’s two biggest dollar stores and that Dollar General would be required to divest more stores than it has offered.

To duck the regulatory risk, Family Dollar instead is sticking by the lower cash-and-stock bid from Dollar Tree, which hasn't capped the number of stores it would sell to complete the deal. And those two chains have less overlap and different models. Family Dollar sells consumables and household goods with most prices running up to $10 an item—much like Dollar General, while Dollar Tree mostly sticks to selling items at $1 each.

Family Dollar said it believes Dollar General’s offer wouldn’t pass regulatory muster. According to documents filed in a recent court case, the company’s board had been advised that Dollar General’s offer had a 40% chance of being approved by antitrust regulators as written.

The saga has been going on since the summer when Dollar Tree made a surprise offer kicking off the bidding war in a slice of the retail industry that has thrived in the sluggish economy. It has also drawn interest from activist investors. Elliott Management Corp. built up a stake in Family Dollar in the hopes that a deal with Dollar General could happen. Meanwhile, Trian Fund Management LP, which has an executive on Family Dollar’s board, has backed the Dollar Tree deal.

The FTC is reviewing the agreement between Family Dollar and Dollar Tree—as well as Dollar General’s offer. The regulators are probing the similarities between the discount retailers’ businesses and whether any prospective deal would affect pricing as well as competition.

Dollar Tree said earlier this month that it would need to divest a “relatively small” number of stores to gain antitrust approval for the deal, which could close in February. Dollar General week delayed a planned update to shareholders on how talks with regulators were progressing without providing a reason.

Three Family Dollar shareholders filed a lawsuit in a Delaware court to stay Tuesday’s vote, arguing that the company’s board should have at least engaged in talks with Dollar General. The court denied the motion.

Family Dollar shareholders voted by a margin of 72 million shares to 15 million shares to adjourn Tuesday’s meeting and another meeting was scheduled for Jan. 22. A prior meeting to vote on the Dollar Tree deal had been rescheduled.

Chelsey Dulaney contributed to this article.

Write to Paul Ziobro at Paul.Ziobro@wsj.com and Michael Calia at michael.calia@wsj.com



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