Dollar General extends Family Dollar takeover offer

Dollar General said Friday that it has extended its hostile bid for Matthews-based Family Dollar until Dec. 31. The $80 per share, all-cash bid had been set to expire at the end of the day Friday.

Family Dollar has rebuffed Dollar General’s advances, with the company’s board of directors turning down Dollar General’s bids so far. Instead, Family Dollar’s board wants to complete a previously announced acquisition by rival discount retailer Dollar Tree, which the companies agreed to in July.

Family Dollar shareholders are set to vote on the Dollar Tree deal Dec. 11 in Charlotte. Dollar General is urging shareholders to vote the deal down and instead sell their shares into its tender offer.

So far, Dollar General said 4.1 million Family Dollar shares have been tendered into its offer and not withdrawn. That’s about 3.6 percent of Family Dollar’s outstanding stock. Although still a minority, that’s up from a mere 126,499 shares Dollar General reported had been tendered four weeks ago.

“By tendering their shares into Dollar General’s tender offer, Family Dollar shareholders will be sending a clear message to the Family Dollar board to promptly engage in discussions with Dollar General,” the Goodlettsville, Tenn.-based retailer said in a statement. The company plans to mail proxy voting cards to Family Dollar shareholders on Monday.

The takeover drama, which will decide the future of one of the Charlotte area’s best-known companies, could come down to whom shareholders believe about the risk of antitrust regulators blocking the deal. Family Dollar employs about 1,400 people at its Monroe Road headquarters in Matthews.

The Dollar Tree deal is valued at $74.50 per share in cash and stock, totaling about $8.5 billion. Although it’s lower than Dollar General’s $80 offer, which totals $9.1 billion, Family Dollar’s board has said the Dollar Tree deal is more certain to be completed.

The Dollar General deal would be more likely to run into antitrust concerns and be blocked by federal regulators, Family Dollar says, because the resulting company would have almost 20,000 stores and significantly reduce competition.

To ensure that antitrust regulators don’t block its bid, Virginia-based Dollar Tree has pledged to divest as many stores as regulators require – a so-called “hell or high water” promise. The combined company would have about 13,000 stores. Dollar Tree has said it would keep the Family Dollar brand name, as well as a significant corporate presence in Matthews.

On the other hand, Dollar General has pledged to sell up to 1,500 stores to meet regulators’ requirements, but hasn’t made its own “hell or high water” pledge.

Elliott Advisors, a hedge fund that owns 4.9 percent of Family Dollar, has criticized the company’s board of directors for not accepting the Dollar General deal. The hedge fund has nominated its own slate of seven directors to the Family Dollar board, charged with making sure the retailer does “everything in its power” to give Dollar General a chance to complete the deal.

On the other hand, Family Dollar CEO Howard Levine and hedge fund Trian Partners, who together own almost 16 percent of the company’s stock, have pledged to vote for the Dollar Tree deal.

Meanwhile, Institutional Shareholder Services issued a report Thursday saying Dollar Tree’s deal appears less risky for shareholders than Dollar General’s. Large institutional shareholders frequently rely on groups such as ISS to help them decide how to vote on corporate deals.

“The regulatory risk to Family Dollar shareholders is zero (if they vote to accept Dollar Tree’s offer),” ISS wrote. “The Dollar General offer, by contrast, is conditioned on its antitrust review resulting in required store divestitures of no more than 1,500 stores. This is clearly a non-zero regulatory risk for Family Dollar shareholders.”

ISS also criticized Dollar General for not adopting its own “hell or high water” clause and clearing up any uncertainty for shareholders, and for not requesting an expedited antitrust review to put the Family Dollar board’s concerns to rest.

“Incongruously … Dollar General has repeatedly chosen not to remove all doubt,” ISS wrote.

The Family Dollar takeover saga follows the battle for Charlotte-based Chiquita Brands International. Last week, Chiquita shareholders voted down a planned merger with Irish produce company Fyffes by a 2-to-1 ratio. Instead, Chiquita was left with a $630 million buyout offer from two rival Brazilian firms, which Chiquita accepted Monday.