Family Dollar rejects Dollar General proposal
MATTHEWS, N.C. — Citing antitrust concerns, Family Dollar Stores has rejected Dollar General’s proposal and reaffirmed its support of the merger agreement with Dollar Tree.
“Our board of directors, with the assistance of outside advisors and consultants, has been carefully analyzing the antitrust issues in a potential combination with Dollar General since the beginning of this year, as detailed in the company’s preliminary proxy statement that was filed by Dollar Tree with the SEC on August 11. Our board reviewed, with our advisors, all aspects of Dollar General’s proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed. Accordingly, our Board rejects Dollar General’s proposal and reaffirms its support for the pending merger with Dollar Tree,” stated Howard Levine , chairman and CEO of Family Dollar.
Levine continued, “I would also like to note that Dollar General’s letter, sent late last night, contained blatant mischaracterizations and did nothing to address the antitrust issues in Dollar General’s proposal.”
Ed Garden, a co-founder and partner at Trian Fund Management, a large shareholder of the company, said, “Consistent with its fiduciary duties, the company’s board has sought to maximize shareholder value while considering the certainty of closing a transaction. The CEO of Dollar General said he believes that antitrust is not a risk but did not put forth a proposal that eliminates regulatory risk for Family Dollar shareholders. Given the significant antitrust issues involved with Dollar General’s proposal, we will not jeopardize the Dollar Tree deal for a transaction with Dollar General that has a high likelihood of not closing due to antitrust considerations. We remain fully committed to the Dollar Tree transaction.”
In January 2014, representatives of Dollar General postponed and then cancelled a scheduled meeting with Family Dollar and said they would be in touch in the spring of 2014, Family Dollar stated. The Family Dollar board, working with its advisors, initiated a strategic review in January 2014, which included an antitrust analysis of a combination with Dollar General by the company’s outside legal advisors and an econometric consultant. Family Dollar stated that it contacted Dollar General on June 9, 2014, to request that the companies’ respective antitrust lawyers meet to discuss antitrust law perspectives on a Family Dollar/Dollar General business combination. Dollar General apparently declined to schedule a discussion on antitrust issues. A meeting was scheduled between the parties on June 19, 2014. Prior to that meeting, a number of shareholders and analysts publicly stated that a sale of the company should or would occur imminently. At the June 19 meeting, representatives of Dollar General stated that they were not interested in pursuing a strategic transaction at that time. At the time of the June 19 meeting, Family Dollar was bound by a customary non-disclosure agreement with Dollar Tree that prohibited disclosure of the existence of any discussions with Dollar Tree, the company stated.
However, in the letter sent Wednesday to Family Dollar’s board, Dollar General stated, “During the June 19 meeting, although noting that the timing was not optimal for Dollar General, our representatives expressed more than once our interest in exploring a combination with Family Dollar. At no time during this meeting did Mr. Levine indicate that there was a process, that there was any urgency to act or that there were discussions with another potential buyer. In fact, Mr. Levine’s response to specific questions posed by our representatives gave us quite the opposite impression. Had we left the meeting with the belief that a sale of Family Dollar was imminent, we assure you that our course of action would have been different.”
Family Dollar may have the same issue with Dollar Tree relative to anti-trust. I don't believe the Feds should allow either of these mergers, unless significant store closures are required.
Dollar Tree continues to deliver despite 2.6% profit decline in Q2
CHESAPEAKE, Va. — Dollar Tree delivered its 26th consecutive quarter of positive comparable store sales growth in second-quarter 2014, but profit declined 2.6% thanks to increased freight costs and investments in higher-value products.
Consolidated comparable-store sales increased 4.5% on a constant currency basis. Adjusted for the impact of Canadian currency fluctuations, the comparable store sales increase was 4.4%. Consolidated net sales increased 9.5% to $2.03 billion from $1.85 billion in the prior year’s second quarter.
Gross profit in the quarter increased 7% to $694.1 million from $648.7 million in the prior year’s second quarter.
Net income, compared to the prior year’s second quarter, including acquisition-related costs, decreased approximately $3.2 million to $121.5 million, and diluted earnings per share increased by 5.4% to $0.59. Excluding acquisition-related costs, net income increased approximately $1.4 million to $126.1 million and diluted earnings per share increased 8.9% to $0.61.
“I am very pleased with our second quarter results,” CEO Bob Sasser said. “Expanded assortments of high-value product contributed to our strongest quarterly comparable store sales performance in two years. Pet supplies, hardware, household products, food, electronics and party goods all performed well in the quarter. Our 4.5% comp sales resulted from increases in both customer traffic and average ticket. I am particularly proud of our store associates. Our store teams continue to execute at a high level as the Company delivered its 26th consecutive quarter of positive comparable store sales growth. In challenging macro environments, consumers are increasingly relying on Dollar Tree to be part of the solution in managing their family’s budget. Our stores are well-stocked with incredible values and we are prepared for the fall selling season.”
The company opened 90 stores, expanded or relocated 20 stores and closed 4 stores during the quarter. Retail selling square footage increased to 44.8 million sq. ft., a 6.8% increase compared to the prior year.
Looking ahead, the company estimates sales for the third quarter to range from $2.02 billion to $2.07 billion, based on low- to mid-single digit positive comparable store sales. Diluted earnings per share are estimated to range from $0.61 to $0.66, excluding acquisition-related costs.
Full-year 2014 sales are now estimated to range from $8.44 billion to $8.55 billion. This estimate is based on a range of low- to low-mid-single digit positive comparable store sales. Diluted earnings per share, which includes $0.02 per share of second quarter acquisition-related costs, are expected to range from $2.94 to $3.06, excluding third and fourth quarter acquisition-related costs.
Early this week, Dollar General bid $78.50 for Family Dollar Monday morning in a $9.7 billion deal that exceeds the $74.50 a share Dollar Tree offered for Family Dollar on July 28. The deal would create a small format powerhouse with nearly 20,000 stores in 46 states and sales of more than $28 billion. In a statement released this morning, Family Dollar’s board of directors has unanimously rejected the non-binding proposal made by Dollar General on the basis of antitrust regulatory considerations. The Family Dollar board also unanimously reaffirmed its recommendation in support of the merger agreement with Dollar Tree.
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