Matthews, NC–The board of directors at Family Dollar Stores unanimously rejected last week a takeover bid from Trian Group, the hedge fund run by activist investor Nelson Peltz.
Insisting that Trian’s unsolicited takeover offer of $55 to $60 a share, or up to about $7.8 billion, “substantially undervalues” the company, the board suggested that a sale is not in the best interests of shareholders.
Launches ‘Poison Pill’
Instead, the board concluded that the continued implementation of Family Dollar’s “strategic plan” affords the best prospects for the discount retailer and adopted a shareholders’ rights plan that will last 12 months and has a 10% ownership threshold.
Such a so-called “poison pill” would reduce the likelihood that any person or group will gain control of the company by buying shares on the open market or without paying a premium for all shares, the company said.
“In September 2010, we shared with investors our strategic plan to accelerate revenue growth, expand operating margins and optimise our capital structure,” said Howard Levine, chairman and ceo. “The results from this fiscal year are a positive reflection of this plan.”
Family Dollar has accelerated new store openings, launched a store renovation program and invested to improve operational capabilities, Levine emphasised. Over the past year its quarterly dividend has risen by 16% to $0.18 per share and the board has approved a $750 million share repurchase program, he added.
“Family Dollar is executing effectively on its business plan and has a proven record of delivering superior results for shareholders.” said Levin, who’s father, Leon, started the 6,800-unit retail concept with a single store in 1959.
Train announced its takeover bid in February after amassing a 7.9% stake in the retailer. Trian, which also holds Wendy’s/Arby’s Group and Tiffany & Co, rarely buys entire companies, analysts said.