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Dollar Tree To Buy Family Dollar For $8.5B

Two discount giants based in the Southeast are coming together.

Chesapeake, Va.-based Dollar Tree said this morning that it plans to purchase Family Dollar Stores, headquartered in Matthews, N.C., in a cash and stock transaction valued at $8.5 billion, or $74.50 per share—a 22.8 percent premium over Family Dollar’s closing price as of July 25. The transaction, which has been unanimously approved by the boards of directors of both companies, is expected to close by early 2015.

“This is a transformational opportunity,” said Bob Sasser, Dollar Tree’s CEO. “With the acquisition of Family Dollar Stores, Dollar Tree will become a leading discount retailer in North America, with over 13,000 stores in 48 states and five Canadian Provinces, sales of over $18 billion and more than 145,000 associates on our team. We will continue to operate under the Dollar Tree, Deals and Dollar Tree Canada brands and, when this transaction is complete, we will operate under the Family Dollar brand as well. Throughout our history, we have strived continuously to evolve and improve our business. This acquisition, which enhances our footprint and diversifies our company, will enable us to build on that progression and, importantly, positions Dollar Tree for accelerated growth. By offering both fixed-price and multi-price point formats and an even broader, more compelling merchandise assortment, we will be able to provide even greater value and choice to a wider array of customers.

“Dollar Tree has a long record of consistent, profitable growth, strong financial performance, prudent capital management and outstanding total shareholder returns. The acquisition of Family Dollar is consistent with our vision to be the leader in value retailing.

“This acquisition will extend our reach to lower-income customers and strengthen and diversify our store footprint,” Sasser added. “We plan to leverage best practices across both organizations to deliver significant synergies, while we accelerate and augment Family Dollar’s recently introduced strategic initiatives. Combined, our growth potential is enhanced with improved opportunities to increase the productivity of the stores and to open more stores across multiple banners.

“I have long admired the Family Dollar brand and its key position in the minds of the consumer. We are excited about the prospects for the combined company and the many opportunities that it will create for our associates, vendors, business partners and shareholders.”

Sandy Skrovan, Planet Retail research director for the U.S., says the proposed acquisition shakes up the small-box value space.

“But (the proposed deal is) not entirely unexpected,” Skrovan said. “Underwhelming financials recorded by several value retailers this past year and, more recently, some ‘shaky’ quarterly comparable-store sales results—including those of Family Dollar—suggested possible over expansion or at least expansion at too aggressive a pace. Planet Retail anticipated a period of consolidation or some shake-out in the offing. And now here’s the proof.

“So it’s now a two-horse race with Dollar General and a pumped-up Dollar Tree jockeying for ascendancy in the U.S. value channel,” Skrovan added. “Via this assertive move, Dollar Tree could very well leapfrog long-time market leader Dollar General. The merger also provides additional and more formidable competition for Walmart as it accelerates its own small-box expansion via Walmart Express.”

Howard Levine, CEO of Family Dollar, will remain with the company and report directly to Sasser.

“Upon closing, Howard will become a member of the Dollar Tree board of directors,” Sasser said. “We are excited to welcome the Family Dollar team to Dollar Tree, and we look forward to working together to deliver increased value to the consumer and to our shareholders.”

Levine said, “For more than 54 years, Family Dollar has provided value and convenience to customers. Dollar Tree also has a rich history of providing great value to customers and, together, as one company, we can provide more customers with even greater value and convenience. Today’s announcement represents the successful culmination of a comprehensive strategic review process that our board of directors, working with its financial and legal advisors, began this past winter. While this assessment of alternatives included consideration of a number of potential partners, we are pleased to conclude this process with the announcement of this compelling transaction with Dollar Tree, which our board has unanimously determined to be in the best interests of our shareholders. This combination will enable Family Dollar to accelerate efforts to improve the business and will benefit our dedicated team members who will now be part of a larger, more diverse organization. I am excited about our future with Dollar Tree, and I look forward to working with the Dollar Tree team to complete the combination as quickly as possible to realize the compelling benefits for all our stakeholders.”

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