Dollar General Makes Proposal to Acquire Family Dollar for $78.50 Per Share
Proposal Provides Superior Valuation and All-Cash Certainty to Family
Combination Would Solidify Dollar General's Position as Largest U.S.
Small-Box Discount Retailer
Rick Dreiling, Dollar General's Chairman and CEO, Would Lead Combined
Company through May 2016
GOODLETTSVILLE, Tenn.--(BUSINESS WIRE)--
Dollar General (NYSE: DG) today announced it has made a proposal to
acquire Family Dollar Stores, Inc. (NYSE: FDO) for $78.50 per share in
cash, in a transaction valued at $9.7 billion. The proposal was conveyed
this morning in a letter to Family Dollar's Board of Directors. This
transaction would deliver increased consideration and immediate
liquidity to Family Dollar's shareholders and represents a compelling
opportunity to create value for Dollar General shareholders. The
combination would solidify Dollar General's position as the largest
small-box discount retailer in the U.S. with nearly 20,000 stores in 46
states and sales of over $28 billion.
Dollar General's all-cash proposal of $78.50 per share would provide
Family Dollar shareholders with a substantially superior valuation to
the $74.50 per share cash / stock offer announced by Dollar Tree, Inc.
on July 28, 2014.
"For Family Dollar shareholders, our proposal is financially superior to
the current transaction agreement with Dollar Tree and would provide
Family Dollar shareholders with a substantial premium and immediate
liquidity for their shares," said Rick Dreiling, Dollar General's
Chairman and Chief Executive Officer. "For Dollar General shareholders,
the proposed combination of Dollar General and Family Dollar would be a
significant strategic opportunity to create immediate and lasting
shareholder value. For both Dollar General and Family Dollar customers,
we would be able to provide better value and greater selection.
"We have the utmost respect for Family Dollar, its leadership and its
employees. We look forward to expeditiously entering into constructive
discussions with Family Dollar in order to sign a definitive merger
agreement that provides enhanced value to Family Dollar shareholders and
enables Dollar General to realize the benefits of this combination,"
Dollar General believes the highly complementary nature of the two
companies would create a unique opportunity to deliver value to
shareholders and customers:
Solidify position as the leading small-box discount retailer.
The transaction would create the preeminent small-box retailer in the
U.S. based on store locations, delivering convenience and everyday low
prices to customers through nearly 20,000 stores in 46 states with
sales exceeding $28 billion and over 160,000 employees.
Complementary business models. The business models and product
mixes of Dollar General and Family Dollar are highly complementary.
There is opportunity to more efficiently and effectively manage the
Family Dollar portfolio of stores given Dollar General's strong track
record of success in improving its own profitability since 2008.
Clear operational synergies and integration plan. The proposed
transaction would be expected to generate significant synergies of
$550 million to $600 million on an annual run-rate three years
post-closing. Dollar General has developed extensive integration plans
across work streams. The expected synergies would be derived from
sales growth driven by an improved merchandise offering and store
presentation, purchasing and sourcing efficiencies, distribution and
transportation optimization and administrative savings. The scale that
would be created by a combination would allow Dollar General to
continue to help customers Save time. Save money. Every day!® through
better value and greater selection to customers of both Dollar General
and Family Dollar.
Tenured management team with a proven track record. Rick
Dreiling, who led the management team that transformed Dollar General
starting in 2008, has agreed to postpone his previously-announced
retirement and remain in the role of Chairman and Chief Executive
Officer of the combined company until May 2016, if a merger agreement
is signed, in order to oversee the successful integration of the two
companies. Beyond that date, Dreiling has also agreed that, if asked
by the Board and elected by shareholders, he would remain as a Board
member and would be willing to serve as Chairman.
Significant earnings accretion through synergies. The proposed
transaction would be low double-digit accretive on a percentage basis
to earnings in the first full year excluding implementation and
transaction costs. The combined company would continue to generate
significant cash flow and would be expected to return to investment
grade ratios within approximately three years from the closing of the
The proposed transaction values Family Dollar at an enterprise value of
approximately $9.7 billion, and it represents an enterprise value to
EBITDA (for the last 12 months ending May 31, 2014) multiple of 11.6x.
The proposal has the unanimous approval of the Board of Directors of
Goldman Sachs and Citigroup Global Markets Inc. have agreed to provide
committed financing for all of the financing necessary to consummate the
transaction. The financing includes estimated fees and expenses,
including the $305 million termination fee payable to Dollar Tree in the
event Family Dollar terminates the existing merger agreement to enter
into a merger agreement with Dollar General.
Dollar General has undertaken significant economic and antitrust
analysis with respect to the transaction and is confident it can quickly
and effectively address any potential antitrust issues. Dollar General
is prepared to commit to divest up to 700 retail stores in order to
achieve the requisite approvals, which is approximately the same
percentage of the total combined stores represented by the 500 U.S.
store divestiture commitment in the Dollar Tree merger agreement.
Dollar General is prepared to enter into a definitive merger agreement
that would be substantially similar to the one entered into between
Dollar Tree and Family Dollar, modified as necessary to accommodate
Dollar General's all-cash proposal, the antitrust matters described
above and to provide a time period to close the proposed transaction
consistent with that set forth in the existing agreement. In addition,
Dollar General is prepared to revise the agreement to permit Family
Dollar to continue to pay its regular quarterly cash dividend through
closing on terms consistent with past practice.
Goldman, Sachs & Co. is acting as financial advisor to Dollar General
and Simpson Thacher & Bartlett LLP is acting as its legal counsel.
Below is the text of the letter that was sent today to Howard Levine,
Family Dollar's Chairman and Chief Executive Officer:
August 18, 2014
Board of Directors
Family Dollar Stores, Inc.
10401 Monroe Road
Matthews, North Carolina 28201
Attn: Howard R. Levine, Chairman of the Board
As you know, we at Dollar General admire your company and its
attractive footprint and business prospects. We have respect for
Family Dollar, its employees and its leadership, and both Dollar
General and Family Dollar share a commitment to serving customers in
the communities in which we operate. As such, we were surprised and
disappointed to find out you had entered into a merger agreement
with Dollar Tree.
The Board of Directors of Dollar General is pleased to submit a
proposal to you and the Board of Directors of Family Dollar that
offers Family Dollar shareholders $78.50 per share in cash for all
outstanding shares, providing them with superior value and immediate
and certain liquidity for their shares. Not only is our offer
superior in price, it is 100% cash, as compared to the mix of cash
and stock being offered by Dollar Tree.
Our proposal provides Family Dollar's shareholders with
approximately $466 million of additional aggregate value over Dollar
Tree's offer and represents a premium of 29.4% over the closing
price of $60.66 for Family Dollar stock on the day prior to the
Dollar Tree announcement.
Our proposal is not subject to any financing condition. Goldman
Sachs and Citigroup Global Markets Inc. have agreed to provide
committed financing for all of the financing necessary to consummate
We have conducted a thorough review and analysis of the antitrust
issues that may be raised by our proposed transaction, including
engaging experienced antitrust counsel and a team from Compass
Lexecon as our economist to assist us with our analysis. As a result
of our review and analysis, coupled with the numerous econometric
studies Compass Lexecon has performed utilizing extensive
information and data supplied by Dollar General, we are prepared to
commit to divest up to 700 retail stores in order to achieve the
requisite antitrust approvals, which is approximately the same
percentage of the total combined stores represented by the 500 store
divestiture commitment in the Dollar Tree merger agreement. We are
confident that, with this commitment, we will be able to quickly and
efficiently resolve any potential antitrust issues and that our
transaction is capable of being completed. We look forward to having
the opportunity to share with your counsel the conclusions of our
extensive antitrust work once you have taken the appropriate steps
under your existing merger agreement with Dollar Tree to enable us
to begin discussions.
The Board of Directors of Dollar General has unanimously approved
this proposal and has authorized us to proceed expeditiously. We are
prepared, promptly following the termination of your merger
agreement with Dollar Tree, to enter into a merger agreement that
would provide greater value to your shareholders and would otherwise
be substantially similar to the one that you entered into with
Dollar Tree, modified as necessary to accommodate our all-cash
proposal, as described above with respect to antitrust matters and
to provide a time period to close the proposed transaction
consistent with that set forth in the existing agreement. In
addition, we are prepared to revise the agreement to permit Family
Dollar to continue to pay its regular quarterly cash dividend
through closing on terms consistent with past practice. Dollar
General would also agree to fund the $305 million break-up fee
should you become obligated to pay that fee to Dollar Tree upon
termination of the existing agreement in order to enter into an
agreement with Dollar General.
In addition, I have committed to our Board of Directors to remain as
Chief Executive Officer of Dollar General through May 2016 if this
combination occurs in order to oversee the successful integration of
our two companies. Beyond that date, if asked by the Board and
elected by shareholders, I have agreed to continue to serve as a
Board member and as Chairman.
We have engaged Goldman, Sachs & Co. as our financial advisor and
Simpson Thacher & Bartlett LLP as our legal advisor in connection
with this transaction. Our proposal is subject to completion of a
confirmatory due diligence review of your company, and we and our
advisors are available to commence our due diligence review
Please note that this letter is not meant to, and does not, create
or constitute any legally-binding obligation, liability or
commitment by us concerning a proposed transaction, and, other than
any confidentiality agreement we may enter into with you, there will
be no legally-binding agreement between us regarding the proposed
transaction unless and until we enter into a definitive merger
agreement with you.
We are confident that after you have considered our offer, you will
agree that our proposal constitutes a "Company Superior Proposal"
under the terms of the Dollar Tree merger agreement and that our
proposal presents a compelling opportunity for your shareholders.
This matter has my highest priority and I look forward to hearing
Chairman and Chief Executive Officer
Conference Call Information
The Company will hold a conference call today for 45 minutes starting at
7:00 a.m. CT/8:00 a.m. ET, hosted by Rick Dreiling, Chairman and Chief
Executive Officer, and David Tehle, Chief Financial Officer. If you wish
to participate, please call (855) 576-2641 at least 10 minutes before
the conference call is scheduled to begin. The conference ID is
90102644. For callers outside of the U.S. and Canada, please call (678)
967-4559. The call will also be broadcast live online at www.dollargeneral.com
under "Investor Information, Conference Calls and Investor Events." A
replay of the conference call will be available through September 1,
2014, and will be accessible online or by calling (855) 859-2056. The
conference ID for the replay is 90102644.
Dollar General includes "forward-looking statements" within the meaning
of the federal securities laws throughout this release, particularly
under the headings "Strategic Benefits" and "Transaction Details." A
reader can identify forward-looking statements because they are not
limited to historical fact or they use words such as "may," "will,"
"should," "would," "expect," "believe," "anticipate," "project," "plan,"
"estimate," "forecast," "goal," "objective," "committed," "intend,"
"continue," "will likely result" or "could," and similar expressions
that concern Dollar General's strategy, plans, intentions or beliefs
about future occurrences or results, including by way of example and
without limitation plans, intentions and expectations regarding Dollar
General's proposal to acquire Family Dollar, the financing of a
potential transaction, and the anticipated results, benefits, synergies,
earnings accretion, costs, timing and other expectations of the benefits
of a potential transaction.
Forward-looking statements are subject to risks, uncertainties and other
factors that may change at any time and may cause actual results to
differ materially from those that Dollar General expected. Many of these
statements are derived from Dollar General's operating budgets and
forecasts, which are based on many detailed assumptions that Dollar
General believes are reasonable, or are based on various assumptions
about certain plans, activities or events which we expect will or may
occur in the future. However, it is very difficult to predict the effect
of known factors, and Dollar General cannot anticipate all factors that
could affect actual results that may be important to an investor. All
forward-looking information should be evaluated in the context of these
risks, uncertainties and other factors, including those factors
disclosed under "Risk Factors" in Dollar General's most recent Annual
Report on Form 10-K and any subsequent quarterly filings on Form 10-Q
filed with the Securities and Exchange Commission.
All forward-looking statements are qualified in their entirety by the
cautionary statements that Dollar General makes from time to time in its
SEC filings and public communications. Dollar General cannot assure the
reader that it will realize the results or developments Dollar General
anticipates, including, without limitation, the expected synergies,
earnings accretion or benefits from a potential transaction, or, even if
substantially realized, that they will result in the consequences or
affect Dollar General or its operations in the way Dollar General
expects. Forward-looking statements speak only as of the date made.
Dollar General undertakes no obligation to update or revise any
forward-looking statements to reflect events or circumstances arising
after the date on which they were made, except as otherwise required by
law. As a result of these risks and uncertainties, readers are cautioned
not to place undue reliance on any forward-looking statements included
herein or that may be made elsewhere from time to time by, or on behalf
of, Dollar General.
About Dollar General Corporation
Dollar General Corporation has been delivering value to shoppers for 75
years. Dollar General helps shoppers Save time. Save money. Every day!®
by offering products that are frequently used and replenished, such as
food, snacks, health and beauty aids, cleaning supplies, basic apparel,
house wares and seasonal items at low everyday prices in convenient
neighborhood locations. With more than 11,500 stores in 40 states,
Dollar General has more retail locations than any retailer in America.
In addition to high quality private brands, Dollar General sells
products from America's most-trusted manufacturers such as Clorox,
Energizer, Procter & Gamble, Hanes, Coca-Cola, Mars, Unilever, Nestle,
Kimberly-Clark, Kellogg's, General Mills, and PepsiCo. For more
information on Dollar General, please visit www.dollargeneral.com.
Dollar General Corporation
Winn Pilkington, 615-855-5536
Emma Jo Kauffman, 615-855-5525
Steve Lipin or Shahed Larson, 212-333-3810
Media Hotline, 877-944-DGPR (3477)
Crystal Ghassemi, 615-855-5210
Source: Dollar General Corporation
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