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Family Dollar (FDO) to be Taken Over by Dollar Tree in $8.5B Deal

By: , dated July 28th, 2014

Shares of Family Dollar Stores Inc. (FDO) were up + 14.57 or +24.02 percent to $75.23 per share in premarket trading Monday morning, after the announcement that Dollar Tree Inc. (DLTR) would be buying the company for $74.50 per share. Family Dollar Stores stock closed at $60.66, down -0.48 or 0.79 percent in Friday’s regular trading session.

Matthews, North Carolina based Family Dollar Stores Inc. was founded in 1959 and is a discount retailer operating 8100 stores in 46 states. The company sells both national and quality private brands, employs over 50,000 people nationwide and had a net income of $443.6 million on revenue of $10.4 billion in 2013.

Chesapeake, Virginia based Dollar Tree Inc. is a domestic chain of discount variety stores best known for selling items for one dollar. Dollar Tree operates over 4,900 stores in the 48 continental United States and Canada.

The deal announced early this morning, will have Dollar Tree pay $59.60 in cash and $14.90 in equivalent Dollar Tree stock. The merger, which is expected to close by early 2015 will have Family Dollar shareholders own no less than 12.7 percent and no more than 15.1 percent of the outstanding common stock of Dollar Tree. The Trian Fund Management L.P and Howard R. Levine, who collectively own 16 percent of Family Dollar are supporting the merger by entering into voting agreements

Howard R. Levine, Chairman and Chief Executive Officer of Family Dollar, stated that, “For more than 54 years, Family Dollar has provided value and convenience to customers. Dollar Tree also has a rich history of providing great value to customers, and together, as one company, we can provide more customers with even greater value and convenience. Today’s announcement represents the successful culmination of a comprehensive strategic review process that our Board of Directors, working with its financial and legal advisors, began this past winter. While this assessment of alternatives included consideration of a number of potential partners, we are pleased to conclude this process with the announcement of this compelling transaction with Dollar Tree, which our Board has unanimously determined to be in the best interests of our shareholders.”

Bob Sasser, Dollar Tree’s Chief Executive Officer noted that, “This is a transformational opportunity, “With the acquisition of Family Dollar Stores, Dollar Tree will become a leading discount retailer in North America, with over 13,000 stores in 48 states and five Canadian Provinces, sales of over $18 billion, and more than 145,000 associates on our team. We will continue to operate under the Dollar Tree, Deals, and Dollar Tree Canada brands, and when this transaction is complete, we will operate under the Family Dollar brand as well. Throughout our history, we have strived continuously to evolve and improve our business.”

Family Dollar stock is already trading higher than the $74.50 per share merger price and will open at a new all time high this morning. The fact that the stock is trading higher than the merger price could mean that the deal may be sweetened, or that another bid might surface from a third party. Family Dollar stock will be closely watched this week.

Other News About Family Dollar
Carl Icahn Takes Home ~$159 Million On Family Dollar & Dollar Tree Merger
Activist investor makes a tidy profit in just a few months.
Family Dollar to Begin Hitting the Bottle
Company will begin selling beer and wine in 200 of its stores.

Other Stocks in the News
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Zillow is buying competitor in all stock deal.
Tyson to sell Mexico, Brazil poultry operations
Tyson is raising money to pay for its Hillshire Brands acquisition.

Jay Hawk Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

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