DealBook: Dollar General Makes Hostile Bid for Family Dollar

Photo Family Dollar has been adamant that it is sticking with its deal with Dollar Tree.Credit Rogelio V. Solis/Associated Press Related Links

Updated, 8:10 a.m. |

Dollar General said on Wednesday that it was taking its $9.1 billion offer for Family Dollar directly to shareholders.

The move further complicates Family Dollar's agreed upon deal to sell itself to Dollar Tree for $8.5 billion.

In a statement, Dollar General said it was offering to acquire all of Family Dollar's shares for $80 each.

That is a superior price to Dollar Tree's existing offer of $74.50 a share. But Family Dollar rejected a friendly offer of $80 a share from Dollar General last week, contending that the deal it had reached with Dollar Tree had a better chance of passing muster with antitrust regulators.

But the hostile offer is most likely to, at the very least, delay any deal between Family Dollar and Dollar Tree. And if Family Dollar shareholders disagree with their board, it could result in a Dollar General victory.

"Our offer provides Family Dollar shareholders with significantly greater value than the existing agreement with Dollar Tree as well as immediate and certain liquidity for their shares," Dollar General's chief executive, Rick Dreiling, said in the statement. "By taking this step, we are providing all Family Dollar shareholders a voice in this process, and we urge them to tender into our offer."

Dollar General was caught off guard when Family Dollar, a company it had long sought to acquire, agreed to sell itself to Dollar Tree this summer. Complaining that it was not given a fair chance to bid, Dollar General suggested the decision not to engage in talks was motivated in part by the Family Dollar chief executive's concerns about his job.

But the board of Family Dollar, which includes Edward P. Garden, the chief investment officer of the hedge fund Trian Fund Management, has made it clear which deal it prefers. (Mr. Garden's endorsement of the deal with Dollar Tree is notable because Trian is one of the biggest Family Dollar shareholders, and is looking to sell its shares at the highest possible price.)

Last week, Family Dollar and Dollar Tree went so far as to include a "hell or high water" clause, pledging to do whatever is necessary to clear the deal with regulators.

Dollar General has said it would sell up to 1,500 stores to win antitrust approval. It also committed to pay a $500 million reverse break fee if its deal does not close, but it has not yet offered to include a "hell or high water" clause.

By initiating the tender offer, however, Dollar General can begin discussions with the Federal Trade Commission about what divestitures might be needed for a deal to gain approval.

"Additionally, we now can begin the antitrust review process and will have an opportunity to present our position directly to the F.T.C.," Mr. Dreiling said. "As we previously have stated, we are confident in the results of our antitrust analysis, and we look forward to a constructive dialogue with the F.T.C."

Dollar Tree and Family Dollar did not immediately comment on Dollar General's action.

Goldman Sachs is advising Dollar General and Simpson Thacher & Bartlett is providing legal advice.

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