The Offer of Dollar General Corporation (NYSE:DG) Gets Rejected By Family Dollar Stores, Inc. (NYSE:FDO) On The Basis Of Anti-Trust Issues

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By dmcIntire on August 22, 2014 Consumer Staples

News has it that Family Dollar Stores, Inc. (NYSE:FDO) rejected the $8.95 billion acquisition bid of Dollar General Corporation (NYSE:DG) on the worries that the deal might have some anti-trust issues. The company, however, showed enthusiasm towards the bid that it received from Dollar Tree, Inc. (NASDAQ:DLTR)

A director of Family Dollar Stores, Inc. (NYSE:FDO), Ed Garden, on August 21, said that the company will not put the bid of Dollar Tree on risk for Dollar General offer, which may never be seal due to the anti-trust issues.

It is important to note here that Ed Garden is also a partner and co-founder of Trian Fund Management LP. Trian Fund is the second largest stockholder of Family Dollar Stores, Inc. (NYSE:FDO), with almost 7.3 percent shares in its hands.

Moreover, on August 20, Dollar General wrote a letter to the board of directors of Family Dollar Inc, asking if Howard Levine, the CEO of the company, preferred the deal of Dollar Tree due to his self interest in that company.

The CEO of Family Dollar, Howard Levine, said that the letter was nothing but full of mischaracterization. He further disclosed that the letter did not address any of the anti-trust issues that the proposal of Dollar General contained.

The biggest dollar chain operator in the region of United States, Dollar General, said that the CEO of Family Dollar was not very clear on the company’s demands when both the companies held their talks in June. The representatives of Family Dollar, on the other hand, stated that they were unclear because Dollar General stated in those meetings that it was not quite interested in the acquisition deal.

News has it that Dollar General is willing to cut down on the 700 retail departmental stores clause so as to get the approval from regulatory agencies; once the retail stores are divested, the percentage becomes the same as offered by Dollar Tree.

Dollar Tree, in order to deflect the severe competition that it was facing against Dollar General and Wall Mart, had offered the company a deal of $8.5 billion in cash and some equity.

Dollar Tree announced a 2.6 percent decrease in its quarterly profits due to an increase in the costs that it had incurred over the recent quarter. It will not be wrong to say that Dollar Stores are facing severe problems in the United States market where the large retail chains are offering the same products at cheaper prices.

Coming to the stock prices of Dollar General Corporation (NYSE:DG), the company, on the last trading day, started its stocks at a

Dollar General Corporation (NYSE:DG)

price of $63.02 and closed at a price of $63.61. The company has a market capitalization of $19.34 billion with a price to earnings ratio of 19.78.

Moreover, the stocks of Dollar Tree, Inc. (NASDAQ:DLTR) gained 1.31 percent on the last business day. The company started its stocks at $54.04 and closed at $54.28, after hitting the highest figures of $54.52. The company has a market capitalization of $11.37 billion with a price to earnings ratio of 19.27.