20 states join antitrust probe as Family Dollar pushes deal with Dollar Tree

Twenty states' attorneys general have officially signed on to the antitrust investigation surrounding the buyout of Family Dollar (NYSE:FDO). The company is currently looking at competing bids by Dollar General (NYSE:DG) and Dollar Tree (NASDAQ:DLTR), pending U.S. government approval.

The concern is that if one of the discount chains is absorbed, it would likely lead to higher prices for customers, reported Reuters.

Family Dollar had previously disclosed that attorneys general were involved in the investigation. Among those on the list are Florida, Vermont, Iowa and Indiana.

Simultaneously, Family Dollar is urging shareholders to approve the $8.5 billion takeover deal from Dollar Tree over the higher bid from Dollar General. The deal with Dollar Tree is a "virtual certainty," reported the Wall Street Journal.

After the Dollar General offer was accepted, Dollar General made an unsolicited $9.1 billion bid, which was initially rejected. Eventually Dollar General took its offer directly to Family Dollar shareholders, but this also did little to change the standings. The board stated that the offer, as with the first bid made on Sept. 2, was rejected based on antitrust regulatory considerations.

In a letter to shareholders, Family Dollar said the U.S. government agrees it would be tough for Dollar General to divest enough stores to get regulatory approval. The company offered to close 1,500 stores, but is now estimating between 3,500 and 4,000 possibly problematic stores.

In the meantime, Dollar Tree is working with the Federal Trade Commission over how many stores to divest in order to complete the acquisition. Currently the retailer expects less than 300 stores.

Family Dollar shareholders are set to vote on the Dollar Tree deal on Jan. 22.

The latest assessment by the government "reaffirms the statement that we have been making for several months now about the inability of the Dollar General proposal to be consummated on the terms proposed by Dollar General and the certainty of the Dollar Tree merger," wrote Howard Levine, CEO, Family Dollar, in a letter.

Family Dollar has 8,100 stores, Dollar Tree has 5,282 stores and Dollar General has 11,000 stores, reported Reuters.

For more:
-See this Reuters article
-See this Wall Street Journal article

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