Dollar Tree said Monday that it plans to buy Family Dollar, one of the Charlotte region’s most prominent retailers. Here are four things we know and three things we don’t know about the $8.5 billion deal.
Four things we know:
1. The Family Dollar name isn’t going away. Although executives said they might swap some Family Dollar stores for Dollar Tree locations or vice versa, they’re keeping both store names and plan to operate the companies alongside each other.
2. Dollar Tree sells everything for $1 or less, while Family Dollar focuses on keeping goods in the under-$10 range. That’s not going to change. The companies said they would keep their respective pricing strategies.
3. Family Dollar CEO Howard Levine isn’t going anywhere for now. He’ll stay on to run Family Dollar, reporting to Bob Sasser, Dollar Tree’s CEO. He’ll also join Dollar Tree’s board. But with his Family Dollar stock worth almost $700 million as a result of the acquisition, Levine certainly won’t be tethered to his position.
4. The new company will leapfrog Dollar General, the current dollar store leader, to become the biggest discount retailer in the U.S.
Three things we don’t know:
1. What will happen to Family Dollar’s 1,400 corporate employees at its Matthews office? The combined company will be headquartered in Chesapeake, Va., where Dollar Tree is based. In a Q&A with employees, Family Dollar raised the possibility some jobs will move.
“There are no plans for relocation out of Charlotte at this time. As we work towards closing, there may be an opportunity for some Team Members to relocate,” Family Dollar wrote to its employees.
2. Where will the companies get $300 million a year in savings? Family Dollar and Dollar Tree told investors they plan to save $300 million annually by combining operations such as distribution and purchasing. But executives were short on details Monday about where the money will come from.
3. Will a higher bidder emerge to top Dollar Tree’s price of $74.50 a share? Will activist investor Carl Icahn support the deal? He started the push to sell Family Dollar, but wanted to see a merger with Dollar General – not Dollar Tree. Icahn also wanted Levine out completely. On Monday, Icahn said in a statement that he’s happy with Dollar Tree’s bid, but still believes that another company could come in.
“While we continue to believe there are a handful of potential buyers who could realize greater synergies through a combination with Family Dollar and are hopeful that one or more of them will surface as a result of today’s announcement, we are extremely pleased with Dollar Tree’s intention to acquire Family Dollar,” he wrote. Some analysts also speculated that Dollar General could come back with a higher bid, although others discounted that possibility.
Levine and Nelson Peltz, another activist investor who together control almost 16 percent of the company’s shares, have made a legally binding agreement to vote in favor of the Dollar Tree deal. Icahn hasn’t done so.