Dollar General CEO takes fight for Family Dollar to board with new letter
08/20/2014 9:59 PM
08/21/2014 12:24 AM
The CEO of Dollar General took his fight to buy Family Dollar to the Matthews-based company’s board of directors Wednesday, with a letter in which he accused the company of unfairly favoring rival Dollar Tree in order to secure a job for chief executive Howard Levine.
Rick Dreiling, the Dollar General CEO, also disputed assertions that antitrust concerns would block the combination. He was responding to a report on CNBC that Family Dollar’s board was considering voting against his company’s offer because of concerns the combination would be blocked on antitrust grounds.
Dreiling’s letter, published by Dollar General late Wednesday, represents an escalation in the rhetoric war that could determine the future of one of Charlotte’s best-known homegrown companies. Family Dollar has so far been silent on Dollar General’s upset bid – which would break up a planned acquisition by Dollar Tree – except to say the board would consider the proposal.
In his letter, Dreiling said a securities filing describing the run-up to the Family Dollar-Dollar Tree deal doesn’t provide a full account. While the filing said Dollar General ultimately decided not to pursue a deal, Dreiling said the retailer was in fact interested, and had been led to believe no deal was imminent.
“(The filing) fails to mention that Dollar General representatives have consistently expressed a keen interest in putting our two companies together,” Dreiling wrote. He said Levine had wanted to be CEO of the combined company if a merger happened, something Dollar General wasn’t interested in.
“We cannot help but question whether Dollar General’s failure to embrace such requests by Mr. Levine weighed into Family Dollar’s decision to pursue an agreement with Dollar Tree,” Dreiling wrote.
Family Dollar Vice President of Investor Relations Kiley Rawlins could not immediately be reached late Wednesday. Dollar Tree has not commented on the competing bid, but the company is expected to do so when it reports quarterly earnings Thursday.
Family Dollar agreed to be acquired by Virginia-based Dollar Tree last month for $74.50 a share, in cash and stock. As part of the deal, Levine would stay on with the combined company for at least two years, and would join Dollar Tree’s board of directors.
On Monday, Tennessee-based Dollar General, the nation’s largest small-box discount retailer, announced an all-cash upset bid of $78.50 a share. Dreiling, who has offered to postpone his planned retirement to make a deal happen, said the retailer would have moved to preempt a Family Dollar-Dollar Tree deal if he’d known one was coming. At a June 19 meeting, Dreiling said he was led to believe that wasn’t the case.
“At no time during this meeting did Mr. Levine indicate that there was a process, that there was any urgency to act or that there were discussions with another potential buyer,” wrote Dreiling. “In fact, Mr. Levine’s response to specific questions posed by our representatives gave us quite the opposite impression.”
He said Dollar General indicated it would pay a “modest premium” to Family Dollar’s share price to acquire the company, but no one from Family Dollar followed up.
Dreiling also addressed a report that the Family Dollar board of directors was considering voting against Dollar General’s offer on the basis that it could be blocked for antitrust concerns. Dollar General has offered to sell up to 700 stores of the combined company’s 20,000 to satisfy regulators.
“We believe that the number of store divestitures contained in our offer letter is more than sufficient to take this issue completely off the table,” said Dreiling.
“We have presented you with a superior proposal for your shareholders (although perhaps not for Mr. Levine personally), and we urge you to evaluate our proposal on its merits considering this full set of facts,” said Dreiling.
Family Dollar’s shares, which have surged past both Dollar Tree and Dollar General’s offer price, topped $80 a share in after-hours trading Wednesday. That suggests some investors think another, higher, bid is likely.
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