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Dollar General Starts Bidding War For Family Dollar

Jennifer Lang

A bidding war is underway to buy Matthews-based retail discounter Family Dollar. A few weeks ago, Dollar Tree agreed to an $8.5 billion deal with Family Dollar.

On Monday, Dollar General CEO says his company is willing to pay $9.7 billion. Plus a $300 million break-up fee for Family Dollar to renege on its merger agreement. 

On a conference call, Dollar General CEO Rick Dreiling said he's long been interested in acquiring Family Dollar. So last month's announcement was disappointing.

"There was no one more surprised than us when Family Dollar announced their agreement with Dollar Tree," Dreiling said. "So we feel that we have an offer that is far superior and we're ready to go. We want a merger agreement."  

His company's offer is $78.50 per share – all in cash – compared to Dollar Tree’s $74.50 per share in cash and stock.

Dollar General has also identified 700 stores it could close to meet anti-trust concerns.

Dreiling says there's still a lot to work out if Family Dollar accepts the offer – like which logo would be used, whether Family Dollar would still be based in Matthews, or have a CEO – which is what the Dollar Tree deal calls for.

"I think the cultural issues and the social issues are much different with the Dollar Tree situation than they are for us," he says. 

Dollar Tree has agreed to keep Family Dollar's main office in Matthews and Howard Levine as its CEO. Retail analyst Poonam Goyal with Bloomberg Intelligence says that makes sense because the two companies have very different business models. At Dollar Tree, everything is a dollar or less, while Family Dollar offers many products more than a dollar. Dollar General is similar to Family Dollar, so she would be surprised if Dollar General kept a large presence in the Charlotte area.

"When two companies merge, central offices makes more sense because it avoids duplicate costs," Goyal says. "You don't need two home centers. So do you need two? Or do you want two? It's a question of that."

It's now up to Family Dollar's Board of Directors to compare the offers. A Dollar Tree spokesman says the company has no comment.