Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Family Dollar again urges stockholders to vote for Dollar Tree merger, (Jan 12, 2015)

By Linda O’Brien, J.D., LL.M.

National discount retailer Family Dollar Stores, Inc. today published a letter to stockholders, explaining the recommendation of the Board of Directors that stockholders vote for the merger with Dollar Tree at a special January 22 meeting, particularly in light of the inability of the competing Dollar General proposal to be consummated “on the terms proposed by Dollar General.”

The letter informed stockholders that the FTC staff informed Family Dollar and Dollar General on January 10 that 5,850 of their stores were “presumptively problematic” if the merger were to proceed. On the other hand, the FTC staff indicated that only 310 stores were “presumptively problematic” if the Dollar Tree merger is consummated.

Dollar Tree, Inc. announced plans to acquire Family Dollar in July 2014. The combination would create a discount powerhouse with over 13,000 stores in 48 states and five Canadian Provinces. Competitor Dollar General Corporation, 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. On August 21, Family Dollar’s Board of Directors unanimously reaffirmed its support for a pending merger with Dollar Tree, Inc.

On September 5, Family Dollar’s Board of Directors unanimously rejected the revised, non-binding proposal made by Dollar General Corporation on the basis of antitrust regulatory considerations. The Board’s unanimous determination to reject Dollar General’s revised proposal and to accept Dollar Tree’s commitment to divest as many stores as required for antitrust approval followed 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.

According to a November 19 statement, Dollar Tree was in discussions with the FTC concerning the extent of divestitures that the Commission was seeking in connection with the Dollar Tree-Family Dollar merger. The parties expected to provide Family Dollar shareholders with an update regarding the status of the FTC review by the end of the first week of December. The special meeting was then rescheduled to December 23 to provide Family Dollar shareholders with sufficient time to review the additional disclosure in advance of the meeting.

The Family Dollar Board of Directors adjourned its December 23 special meeting until January 22, 2015. The meeting was adjourned because there were insufficient votes to adopt the merger agreement, according to a company announcement.

According to the letter, the Dollar Tree merger will deliver substantial and certain value to Family Dollar stockholders. The proposed combination of Dollar Tree and Family Dollar would create the leading discount retailer in North America, allow the combined company to target a broader range of customers and geographies, leverage complementary merchandise expertise, and the company would be in a better position to invest in existing and new markets and grow its store base across multiple brands.

Feedback received from the FTC recently on its economic analysis of the Dollar General proposal reaffirms the inability of the Dollar General merger to be approved on the divestiture terms offered by Dollar General. Further discussions with Dollar General would not reasonably be expected to lead to a new proposal that would be likely be completed on its terms.

However, Dollar Tree has made a divestiture offer to the FTC which the Board believes it could quickly reach an agreement with FTC staff on the numbers of stores to be divested, which is likely below 300. Moreover, Dollar Tree has signed confidentiality agreements with multiple potential divestiture buyers and should be in a position to enter into a consent decree with the FTC in February 2015. This would permit FTC clearance and closing of the merger as soon as March 2015.

Finally, Dollar Tree is not willing to agree to further adjournment or postponement of the special meeting without breaching the merger agreement. A breach of such agreement would entitle Dollar Tree to collect a $305 million fee in addition to other damages. If the Dollar Tree merger is not approved, there is a significant risk that Family Dollar will be left without a merger partner and there are uncertainties to Family Dollar as a standalone company in the current challenging market. Therefore, Family Dollar stockholders are encouraged to protect their investment by voting for the Dollar Tree merger agreement, the letter concludes.

Companies: Family Dollar Stores, Inc.; Dollar Tree, Inc.; Dollar General Corporation

News: AcquisitionsMergers Antitrust