Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Dollar General issues update on FTC review of proposed Family Dollar acquisition, (Jan 15, 2015)
Organizations Mentioned:Dollar General | Dollar General Corporation | Dollar Tree Stores, Inc. | Dollar Tree, Inc. | Family Dollar Stores, Inc. | Walmart
By Linda O’Brien, J.D., LL.M.
Since the launch of its tender offer to acquire all outstanding shares of Family Dollar, Dollar General has been actively engaged in discussions with the FTC. Today, the national convenience and discount store chain issued an update on those discussions regarding the proposed acquisition.
Dollar General, which currently has more than 11,500 stores in 40 states, made public a proposal to acquire Family Dollar and its 8,100 stores across 46 states on August 18, 2014. On August 21, Family Dollar’s Board of Directors unanimously reaffirmed its support for a pending merger with Dollar Tree, Inc., which had announced plans to acquire Family Dollar in July. On September 5, Family Dollar’s Board of Directors unanimously rejected the revised, non-binding proposal made by Dollar General on the basis of antitrust regulatory considerations.
According to its update, Dollar General has provided the FTC with tens of thousands of documents and has participated in numerous meetings with FTC staff. To date, the FTC has not reached a final conclusion regarding the number of divestitures that would be required by a Dollar General/Family Dollar combination. Dollar General also has had discussions with various potential buyers who have expressed interest in acquiring stores that may be required to be divested.
Despite the progress made to date and Dollar General’s desire and intention to continue working with the FTC to further refine its analysis, Dollar General has concluded that the additional step of certifying substantial compliance with the FTC’s request for further information and documentary material (“Second Request”) is necessary. To that end, Dollar General has been, and continues to be, concurrently working toward certifying substantial compliance, which Dollar General currently targets to complete by February 10, 2015, the company stated. Dollar General has chosen not to be constrained by a timing agreement with the FTC. In the absence of such an agreement, the FTC will have 30 days from the date on which Dollar General certifies substantial compliance with the Second Request to determine either to allow the transaction to close or to sue to enjoin the transaction. Although Dollar General believes that this matter should be amenable to resolution by consent agreement with the FTC, it is prepared to defend litigation if necessary.
In its review of the proposed Dollar General/Family Dollar transaction, the FTC has departed from the approach used to analyze retail mergers over recent years and has instead relied heavily on an untested theoretical model for predicting circumstances in which pricing will increase, the statement continued. The use of this model as a predictor of the likelihood of price increases is controversial, according to Dollar General, and the model is highly sensitive to adjustments in its assumptions and specifications. Based on these and other factors, including Dollar General’s national, Walmart-focused prices, the company believes that if given the opportunity to complete the FTC review process, the number of required store divestitures would be manageable and should not exceed the 1,500 store divestitures offered by Dollar General.
The Dollar General statement urged Family Dollar shareholders to tender their shares into Dollar General’s offer before it expires and vote the proxy card in order to vote against the merger agreement with Dollar Tree. By tendering their shares into Dollar General’s tender offer and by voting the proxy card, Family Dollar shareholders would be sending a clear message to the Family Dollar Board of Directors to promptly engage in discussions with Dollar General. A vote against the merger agreement with Dollar Tree would not obligate Family Dollar shareholders to tender their shares in the Dollar General tender offer, the statement noted.
Companies: Family Dollar Stores, Inc.; Dollar Tree, Inc.; Dollar General Corporation
News: AcquisitionsMergers Antitrust