Wall Mart Stores, Inc. (NYSE:WMT) Unlikely To Enter A Bid for Acquisition of Family Dollar Chain

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By Ross Schwartz on August 20, 2014 Consumer Staples

According to the latest news, Wall Mart Stores, Inc. (NYSE:WMT) is unlikely to enter a bid for the acquisition of Family Dollar Stores, Inc. (NYSE:FDO). The people familiar with the matter said that Wall Mart Stores, Inc. (NYSE:WMT) has taken this decision after a detailed internal review of the acquisition deal and the goals of Wall Mart Stores, Inc. (NYSE:WMT).

Sources have it Wall Mart Stores, Inc. (NYSE:WMT) reached this decision because Family Dollar Stores, Inc. (NYSE:FDO) would not match with the smaller Wal-Mart stores. Moreover, the people familiar with the deal disclosed, on the condition that their names will not be mentioned as the deliberation process of Wal-Mart was private, that Wall Mart Stores, Inc. (NYSE:WMT) has not contacted Family Dollar for any deal or bid.

Coming to the bids that Family Dollar Stores, Inc. (NYSE:FDO) has received up till now; the company, last month, received an $8.5 billion deal from Dollar Tree Inc. It also received a rival deal of $9 billion from Dollar General Corporation (NYSE:DG) yesterday, August 19, 2014. The deal made by Dollar General Corporation (NYSE:DG) excludes all the debts of Family Dollar Stores.

The shares of Family Dollar Stores, Inc. (NYSE:FDO) rose further and crossed the deal price, which suggests that the investors are expecting even a better deal.

If the chains of Dollar Stores consolidate, then Wall Mart Stores, Inc. (NYSE:WMT) will be facing much competition in the near future. If, on the other hand, Wall Mart Stores, Inc. (NYSE:WMT) does make a bid and acquire the Family Dollar chain, not only will its sales boost up but the company will also be breaking its tradition of not buying the competitor chains in the region of United States.

The spokesperson of Wal-Mart Arkansas, Brooke Buchanan, refused to comment on the deliberations of Wal-Mart as to whether it should buy out Family Dollar or not.

Brooke said that Wall Mart Stores, Inc. (NYSE:WMT) focus is on its business and the company does what it deems beneficial for its shareholders. She further said that the company is focused on running its operations in a good manner, and that is why Wall Mart Stores, Inc. (NYSE:WMT) can serve the needs of its clients anytime and anywhere.

Dollar General Corporation (NYSE:DG) made its rival bid yesterday in an attempt to gain the position of the biggest dollar chain. If Dollar General remains successful in acquiring the Family Dollar chain, the company would be generating annual revenues of around $28 billion from 20,000 of its departmental stores.

Dollar General Corporation (NYSE:DG) will be paying around $78.50 per share in cash. Dollar Tree Inc, on the other hand, will be paying a total of $74.50 in cash and some equity stocks to the shareholders of Family Dollar. Dollar General said that if its bid gets approved, Family Dollar will get around $550 – 600 million in savings.

On the last trading day, August 19, 2014, the share prices of Dollar General Corporation (NYSE:DG) dropped by 0.3 percent and reached to $63.93 shares, which indicates that the investors want the corporation to fully consolidate this sector of the industry. The share prices of Family Dollar Store, Inc. (NYSE:FDO) remained at $79.87 whereas the share prices of Dollar Tree Inc. increased by 0.7 percent and reached $54.65.