Dollar Tree’s agreement Friday to sell 330 Family Dollar locations to a private equity firm was a “positive” and “necessary step” to completing the acquisition of Matthews-based Family Dollar, one analyst said Monday, and hopefully is the “last major hurdle to clear for approval.”
In a research note, Scot Ciccarelli, managing director at RBC Capital Markets, noted how a number of unknowns still exist about the sale, including how much Dollar Tree will be paid for the sale of the stores to Sycamore Partners, a New York private equity firm.
Another unknown, Ciccarelli wrote, is whether there are any additional agreements with Sycamore regarding the transaction, such as noncompetes or distribution arrangements. Another key question Ciccarelli noted is whether the stores are concentrated in any particular part of the country.
The sale was intended to address competition concerns raised by the Federal Trade Commission, which is still reviewing the deal. Chesapeake, Va.-based Dollar Tree said last month it expects the deal to close in early July.
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“While the continual delays in the closing of the ... transaction delays the realization of cost synergies (changing the timing, but not the overall dollar impact), we continue to believe this deal will be highly accretive for (Dollar Tree),” Ciccarelli wrote, meaning the deal will add value for Dollar Tree.
Once complete, the Family Dollar-Dollar Tree merger will create the largest U.S. dollar store chain by store count with more than 13,000 stores and $20 billion in revenue.
Dollar Tree has previously said the stores being divested represent about $45.5 million in annual operating income for Family Dollar. Sycamore Partners said Friday that it intends to run the stores under the banner Dollar Express.