Filing: Dollar Tree pursued Family Dollar months before Icahn push

08/11/2014 4:35 PM

08/11/2014 5:39 PM

Discount retailer Dollar Tree first contacted Matthews-based rival Family Dollar Stores about a possible acquisition in late February, months before investor Carl Icahn began pushing for a Family Dollar sale, according to a securities filing Monday.

The Morgan Stanley banker who fielded the initial call said Family Dollar CEO Howard Levine would be willing to talk to Dollar Tree counterpart Bob Sasser, but noted Family Dollar wasn’t for sale. By July 28, Chesapeake, Va.-based Dollar Tree had announced a deal to buy Family Dollar for $74.50 per share in cash and stock.

The filing issued by Dollar Tree provides new details on how the deal came together and outlines Family Dollar’s flirtations with another suitor, listed only as “Company A,” that date to February 2013. That company is likely discount retailer Dollar General, based in Goodlettsville, Tenn.

Icahn upped the public pressure on Levine to sell when he disclosed on June 6 that he had purchased 9.4 percent of Family Dollar’s stock and wanted to meet with management about “strategic alternatives.”

A day later a director at Company A told Levine it would be reluctant to negotiate a deal if Icahn were involved in the process. Sasser called Levine to say he was still interested but also “expressed concern about Mr. Icahn’s involvement,” according to the filing.

On June 9, Levine called Icahn, and the investor proposed that Family Dollar consider a transaction with Company A and said he might call the company directly. In a July 16 CNBC interview, Icahn said he believed there was “great synergy between Dollar General and Family Dollar.”

A Family Dollar spokesman declined to comment. A Dollar General spokesman could not be immediately reached.

Dollar Tree’s Sasser made the first bid for Family Dollar in mid-May, offering between $68 and $70 for each Family Dollar share, according to the filing. On June 20, Dollar Tree upped the offer to between $72 and $74, which Levine said was still too low. Sasser said $74.50 was as high as he would go.

Icahn wasn’t the only investor pushing Levine to sell. In October 2013, Levine met with hedge fund manager John Paulson of Paulson & Co., who advocated for a sale, according to the filing. A month later, Paulson disclosed he owned a 9.9 percent stake in Family Dollar.

Bloomberg News reported last week that Dollar General is still weighing a bid that would challenge Dollar Tree’s $8.5 billion offer for Family Dollar. Family Dollar shares closed Monday at $77.05, above Dollar Tree’s $74.50 offering price.

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