Dollar General (DG) Bids $9.7B for Family Dollar
Shares of Dollar General Corporation (DG) were up +6.36 or +11.07 percent to $63.82 per share in premarket trading on Monday, after the company announced early this morning it would pay $78.50 per share for Family Dollar Stores Inc. (FDO). Family Dollar received a bid of $74.50 per share from Dollar Tree (DLTR) last month.
Goodlettsville, Tennessee based Dollar General Corporation was founded in 1939 and is a domestic chain of discount stores operating more than 10,000 retail outlets in 40 U.S. states that employs over 90,000 people. The company is not a "dollar store in that it sells off brand and close-out branded products for higher prices along with its discounted merchandise and typically opens stores in communities too small for Wal-Mart (WMT).
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. Family Dollar Stores stock is trading up +3.64 or +4.79 percent to $79.70 per share in this morning's premarket. The stock closed at $76.06, down -0.28 or -0.37 percent in Friday's regular trading session.
The deal announced this morning would have Dollar General pay $78.50 per share in cash for Family Dollar, which would work out to about $8.9 billion. With debt included, the deal is worth about $9.7 billion, a substantial premium to Dollar Tree's $74.50 offer made last month.
The combination of Dollar General and Family Dollar Stores would create a company with 20,000 stores and over $28 billion in revenue. Dollar General is expecting to generate as much as $550 to $600 million in cost savings as a result of the merger. Dollar General also said it was willing to sell as many as 700 stores to avoid antitrust issues.
Dollar General's Chairman and Chief Executive Officer, Rick Dreiling stated in the company's press release this morning that, "For Family Dollar shareholders, our proposal is financially superior to the current transaction agreement with Dollar Tree and would provide Family Dollar shareholders with a substantial premium and immediate liquidity for their shares, he continued, "For Dollar General shareholders, the proposed combination of Dollar General and Family Dollar would be a significant strategic opportunity to create immediate and lasting shareholder value. For both Dollar General and Family Dollar customers, we would be able to provide better value and greater selection.
Goldman Sachs (GS) and Citigroup (C) Global Markets Inc. will provide financing for the deal, which includes a $305 million termination fee payable to Dollar Tree for ending its agreement with Family Dollar.
The proposed deal with Dollar General is getting approval from Family Dollar and Dollar General stockholders and investors as can be seen in today's premarket. Dollar Tree stock however is down -0.80 or -1.45 percent to $54.80 per share this morning.
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