Family Dollar Stores Inc rejected Dollar General Corp's acquisition offer, citing antitrust concerns, and reaffirmed its support for a buyout offer from Dollar Tree Inc.
"Our board reviewed, with our advisors, all aspects of Dollar General's proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed," Family Dollar's Chief Executive Howard Levine said in a statement.
He also said Dollar General's letter, sent late on Wednesday, "contained blatant mischaracterizations and did nothing to address the antitrust issues in Dollar General's proposal".
Dollar General offered about $9.7 billion to acquire Family Dollar this week, trumping an $8.5 billion bid from Dollar Tree.
Dollar General Corp. said Monday that it would pay $78.50 per share in cash, 3 percent higher than Family Dollar Stores Inc.'s Friday closing price of $76.06. Dollar General put the deal's value at $9.7 billion.
Last month Dollar Tree Inc. made an $8.5 billion bid for Family Dollar. It offered to pay $59.60 in cash and the equivalent of $14.90 in shares of Dollar Tree for each share they own. The companies put the value of the transaction at $74.50 per share at the time. Including debt and other costs, the companies estimated the transaction to be worth approximately $9.2 billion.
Dollar General said that its offer would create a business with almost 20,000 stores in 46 states and sales of more than $28 billion. The Goodlettsville, Tennessee, company anticipates annual savings of $550 million to $600 million three years after the transaction closes.
Representatives for Dollar Tree and Family Dollar did not immediately respond to requests for comment.
The jockeying to secure Family Dollar comes as discounters look to fend off competition from companies such as Wal-Mart Stores Inc., which has been stepping up its courtship of lower-income customers.
Dollar stores grew during the recession as people across income groups searched for cheaper options. To attract a broader array of customers, they also expanded their offerings to include more groceries and brand-name products, instead of just the party favors and other knickknacks people often associated with them.
More recently, however, sales at dollar stores have been suffering because the lower-income customers who go to them are facing persistent job instability and slow wage growth in the aftermath of the recession. Wal-Mart Stores Inc. and Kroger Co. also have been opening smaller store formats to directly compete with dollar stores.
Dollar General and Family Dollar sell products are various prices. At Dollar Tree, everything at its stores costs just a buck.
Family Dollar has come into play because of its business struggles. The Charlotte, North Carolina company has been shuttering stores and cutting prices in hopes of boosting its financial performance. In June investor Carl Icahn urged the company to put itself up for sale.
Dollar General had said that it beleived it could quickly and effectively address any antitrust issues and was willing to divest up to 700 of its stores in order to get the necessary approvals for the transaction. Dollar Tree had agreed to divest 500 of it US stores for its proposed deal.