Dollar General Raises Bidding War

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Dollar General is currently in a bidding war to acquire Family Dollar where multiple parties keep raising the price. Family Dollar, which has always been viewed from a financial angle as second of the three major dollar store chains, is being bid on by General and Dollar Tree with each willing to pay huge amounts. There are even some that expect struggling super-chain Walmart to make a play at some point to protect their business model.

The official highest bid for Family Dollar stands at $9.7 billion from Dollar General, who upped their own bid from $8.95 billion and has topped the last bid Dollar Tree by $1.2 billion. The $9.7 billion would be a result of paying $78.50 per share to stock holders, plus a $305 million dollar break-up fee to stop the deal with Tree, and potentially expanding General to over 20,000 locations in 46 states. The combined might of General and Family would be worth over $28 billion dollars and have over 160,000 employees, and create “the preeminent small-box retailer” according to a statement from the leading bidder. This could have them in a more stable, precise position to compete with Walmart, who is now seen as their main competition.

Walmart is raising the pressure on Dollar General in the midst of this bidding war. These two corporations often target the same consumer base with the same deeply discounted ideals. This bid has been seen by some experts as general beefing-up to keep Walmart from their established communities.

Some analysts have even expected for Walmart to enter the biding, expanding to their same audience while creating a more convenient option for rural areas. However, Walmart has already sent out an official comment distancing themselves from the current round of bids, “We like our position as it relates to small formats.” The statement goes on to say their model has fuel, frozen, pharmacy, and fresh products just about anywhere a consumer could want and their small sector position is “good.”

Dollar Tree originally pitched their price of $74.50 per share to buy Family Dollar back in July. Despite this aggressive move, the sudden bid from General has many in Wall Street, as presented by rising stock in the company, betting on that horse to win this race. Family Dollar stock has risen by 5 percent in a reaction to the competition while General stock has risen by 10 percent on the back of announcements of expected synergies between $550 and $600 million dollars within three years. In the background is Dollar Tree who has seen their stock slip by 2 percent.

A Deutsche Bank analyst offered a statement on Monday that expressed confidence in the General business model and acquisition. Investors have already brought the stock price of Family Dollar above the offer price from General, indicating that holders are expectant of continuing battle.  According to a Telsey Advisory Group analyst named Joseph Feldman, both General and Tree “have some capacity to go a little bit higher.” This catching sentiment has the bidding war raising prices as Dollar General continues to make their financial pitch.

By Myles Gann


Forbes (Wall Street)
Forbes (Walmart)
New York Times

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