Last week, Dollar Tree Inc. announced its offered an $8.5 billion takeover bid of Family Dollar Stores.
Now Bloomberg is reporting that Dollar General Corp. is also vying a bid for Family Dollar Stores Inc.
“Dollar General is working with an adviser to evaluate its options and knows that banks are willing to finance a counterbid, one of the people said, asking not to be identified discussing private information. Family Dollar last week agreed to be acquired by Dollar Tree after investors Carl Icahn and Nelson Peltz had pushed for a sale,” Bloomberg reported.
Market Value of $8.8 Billion
It seems that Dollar General passed on a previous chance to bid on Family Dollar but now is re-evaluating that since Family Dollar may soon be out of its reach. There is no guarantee that it will make an offer, the people close to the bid told Bloomberg, with one putting the chance of a bid at 50%.
Family Dollar has traded at or above the $74.50 a share price that Dollar Tree has agreed to pay since that cash and stock agreement was announced on July 28, indicating that investors expect a higher offer. The shares have risen 2% to $77.25 at the close of exchanges on Wednesday, giving the company a market value of $8.8 billion.
The combination of Family Dollar and Dollar Tree—the No. 2 and No. 3 dollar store chains—would leapfrog Dollar General in number of stores to become the largest. With more similarities to Family Dollar, Dollar General may be able to extract even greater benefits from a takeover than Dollar Tree through cost cuts, according to Poonam Goyal, a senior retail analyst for Bloomberg Intelligence.
“Dollar General and Family Dollar is a match, they are comparable businesses coming together,” Goyal said. “While Family Dollar and Dollar Tree are dollar stores, they are very different dollar stores.”
Earlier this year, activist investor Carl Icahn took a 9% stake in Family Dollar al the while pushing for the company to sell itself. Icahn cut his stake, profiting from the run up in shares after the sale to Dollar Tree was announced.