Family Dollar (FDO) Postpones Vote on Dollar Tree Bid

Shares of Family Dollar Stores Inc. (FDO) closed down -0.01 or -0.01 percent to $79.14 per share on light volume in lackluster pre-holiday trading on Wednesday. The company announced on Tuesday that an overwhelming majority of shareholders had voted to adjourn a vote on a proposed $8.5 billion takeover of the company by Dollar Tree (DLTR). Family Dollar is the target of a hostile bid from Dollar General Corp. (DG), which took its $9.1 billion bid directly to stockholders in September after its offer was rejected by Family Dollar's board.

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.

Goodlettsville, Tennessee based Dollar General Corporation is the largest discount retailer in the United States and was founded in Kentucky in 1939. The company operates over 11,500 retail locations in 40 United States with the exception of the Northwest and North Dakota. The company had net income of $952.7 million on $16.02 billion in revenue in 2013 and specializes in general merchandise and groceries. The company is not a "dollar store , but sells low cost merchandise in a range of prices.

The vote to adjourn the shareholder meeting on the Dollar Tree bid saw 72 million shareholders versus 15 million shareholders vote in favor of postponing the company's special shareholder meeting until January 22nd, 2015. Dollar General, for its part, extended its $80 per share cash bid for Family Dollar - which was set to expire on December 31st, 2014 - until January 31st, 2015.

The principal reason for the postponement of the special meeting was that there were simply not enough Family Dollar shareholder votes supporting the deal with Dollar Tree. Dollar Tree bid $74.50 in cash and stock for the company in July.

The Family Dollar board and in particular, activist investor group, Trian Management rejected Dollar General's higher bid on the basis that the two companies similar business models could have anti-trust issues. The Federal Trade Commission, which is currently examining both deals, might prevent Dollar General from proceeding with the transaction without significant divestiture of both company's assets.

Dollar General said on Tuesday that, "Dollar General remains committed to the proposed acquisition of Family Dollar and will continue to cooperate with the Federal Trade Commission (FTC) to obtain antitrust regulatory clearance for the transaction .

Family Dollar stock is just under Dollar General's bid price, trading at the $79 per share level. It appears that unless Dollar Tree can sweeten the deal, shareholder support for the acquisition may not be achieved by the end of January and Dollar General's higher hostile bid could prevail.

Other News About Family Dollar
Dollar General Still in Talks With Regulators on Family Dollar
Just before the vote on the acquisition was postponed, DG was still talking to the FTC.
For Family Dollar, Bird-in-Hand Bid Looking Plumper
Article on the advantages of the Dollar Tree bid.

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Published on Dec 26, 2014
By Jay Hawk
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.

Copyrighted 2016. Content published with author's permission.

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