Dollar Tree completes purchase of Family Dollar

The Family Dollar store at 1437 E. Sugar Creek Road is one of two in Charlotte that will be sold to New York private equity firm Sycamore Partners. The firm will operate the divested stores under the banner Dollar Express.
The Family Dollar store at 1437 E. Sugar Creek Road is one of two in Charlotte that will be sold to New York private equity firm Sycamore Partners. The firm will operate the divested stores under the banner Dollar Express.

After months in the checkout line, Dollar Tree on Monday officially closed its purchase of Matthews-based Family Dollar.

The long-awaited completion of the deal draws to a close a yearlong takeover saga that included a hostile buyout attempt from another discount retailer, Dollar General.

It also effectively ends local ownership of the homegrown retail chain that traces its roots back to 1959, when Leon Levine opened the first Family Dollar store on Central Avenue with a $6,000 loan.

As part of the deal, Family Dollar shareholders will get $59.60 in cash, plus one-fourth of a Dollar Tree share for each Family Dollar share they own. That’s a total of about $79.55 per share, based on Dollar Tree’s Thursday closing price.

Taking into account Family Dollar’s 114.5 million shares outstanding, the deal’s total price tag is about $9.1 billion.

One of the first pieces of news from the combined company Monday was that Gary Philbin, Dollar Tree’s president and chief operating officer, will assume the role of president and COO of Family Dollar, effective immediately. Philbin, 58, has been with the company since 2001 and will continue to report to Dollar Tree CEO Bob Sasser, who will be in charge of the combined company.

Under an agreement with Chesapeake, Va.-based Dollar Tree, Family Dollar CEO Howard Levine will continue in that role, reporting to Sasser. He has agreed to stay on for two years after the merger’s closing. As expected, Levine on Monday was appointed to Dollar Tree’s board of directors.

In a statement, Sasser said the Family Dollar acquisition will allow Dollar Tree “to extend our reach to low-income customers, while strengthening and diversifying our footprint.” Philbin said in a statement that the integration of the two companies is “now under way.”

Both companies declined interviews Monday.

Though many unknowns remain for the local retail chain, one of the first changes in Charlotte will be the sale of two Family Dollar stores to New York private equity firm Sycamore Partners, which will operate the divested stores under the banner Dollar Express.

One store is at 1437 E. Sugar Creek Road, near the Eastway Drive intersection and just over a mile from a Dollar Tree store on The Plaza. The other is at 5300 South Blvd., near the Tyvola Road intersection and less than a quarter mile from the Dollar Tree store on South Boulevard.

The two Charlotte stores – the only two in North Carolina to be sold as part of the deal – are among the 330 Family Dollar stores federal regulators required Dollar Tree to sell for competitive reasons within 150 days of the deal’s close.

For the Family Dollar stores that remain, Dollar Tree has said that it will keep the chain’s name, and even work to expand both banners. Dollar Tree also said it will maintain Family Dollar’s headquarters.

What’s unknown for Family Dollar could come in the way of cost-cutting measures its new parent plans to take over the next several years to make the combined company more profitable. Dollar Tree says through the deal, it plans to reduce the combined company’s annual expenses by $300 million, though it will take three years to get there.

For the local retail chain, this could mean layoffs for some of the roughly 1,300 workers at its corporate headquarters. But cuts likely would have been more severe if the rival bid by Dollar General for Family Dollar had been successful, analysts have said.

Family Dollar shareholders ultimately approved the sale of the company to Dollar Tree in January. They saw it as more likely than a Dollar General takeover to win approval from antitrust regulators because the Dollar Tree and Family Dollar business models are so different.

While Dollar Tree sells everything in its stores for $1 or less, both Family Dollar and Dollar General sell a variety of items and national brands for $10 and under.

More changes could soon come at the store level for Family Dollar. During the company’s annual shareholders meeting in June, Dollar Tree CEO Sasser said he planned to lower prices at Family Dollar stores and improve their appearance after the deal closed.

Sasser said Family Dollar has strayed from its strategy in recent years by adding stores in suburban areas and raising prices on too many items.

“I think Family Dollar has a little bit more of a real estate problem than people realize,” Brian Yarbrough, an Edward Jones analyst, told the Observer. “It’s going to take several years of remodeling stores, fixing them up and probably moving some locations or shutting some locations down.”

The combined company will have sales of over $19 billion a year and will operate over 13,000 stores, making it the largest dollar-store chain in the U.S. by store count. Staff writers Rick Rothacker and Ely Portillo contributed.

Peralta: 704-358-5079;

Twitter: @katieperalta

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