Family Dollar rejects Dollar General's takeover bid

Family Dollar (NYSE:FDO) has rejected the $9.7 billion takeover bid from Dollar General (NYSE:DG). The offer, made earlier this week, was turned down based on antitrust issues.

Family Dollar said it would stick to its original deal with Dollar Tree (NASDAQ:DLTR) for $8.5 billion.

"The Family Dollar Board, after consultation with its financial and legal advisors who have conducted an extensive antitrust analysis, determined that the Dollar General proposal fails to satisfy this requirement," the retailer said in a statement. "The board's decision follows the unanimous recommendation of a committee of four non-management independent directors that has been overseeing the company's consideration and exploration of strategic alternatives since January 2014."

Earlier in the week, rumors loomed that Family Dollar had brushed aside Dollar General's initial interest in a company buyout because CEO Howard Levine was worried about losing his leadership role, reported the New York Times.

Now, the focus has turned to antitrust laws and the risks that merging the two largest dollar stores would pose. Family Dollar did admit that it had met repeatedly over the course of the year. By the time the two dollar retailers met again in June, Dollar General expressed no interest in pursuing a deal—after declining a meeting with Family Dollar to discuss antitrust issues. 

"Dollar General declined to schedule a discussion on antitrust issues. A meeting was scheduled between the parties on June 19, 2014," said the Family Dollar statement.

Shortly after, in July, the merger of Family Dollar and smaller entity Dollar Tree was announced.

"Our board reviewed, with our advisers, all aspects of Dollar General's proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed," Levine said in the statement. "Accordingly, our board rejects Dollar General's proposal and reaffirms its support for the pending merger with Dollar Tree."

Mr. 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."

Dollar General investor Carl Icahn has criticized Levine and the rest of management for ignoring what he believes is in the best interest of shareholders. Icahn was one of the original board members to insist Dollar General be "put up for sale immediately," back in June.

For more:
-See this New York Times article
-See this Family Dollar press release

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