Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Family Dollar Board rejects merger proposal from Dollar General due to antitrust issues, (Sep 8, 2014)

Family Dollar Stores, Inc. announced on September 5 that its Board of Directors has unanimously rejected the revised, non-binding proposal made by Dollar General Corporation on September 2, on the basis of antitrust regulatory considerations, and has reaffirmed its support of a proposed merger with Dollar Tree, Inc.

Family Dollar’s merger agreement with Dollar Tree contains a customary provision that permits Family Dollar to enter into discussions and share information with any competing bidder, but only if the Board is able to determine that failure to do so would be inconsistent with its fiduciary duties and that the unsolicited, written proposal from the competing bidder would be reasonably expected to lead to a proposal that is not only financially superior, but also "reasonably likely to be completed on the terms proposed."

The Family Dollar 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 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. The committee consists of Glenn A. Eisenberg, Ed Garden, George R. Mahoney, Jr., and Harvey Morgan.

In rejecting Dollar General’s revised proposal, the Family Dollar Board took into account, after consultation with its outside advisors, the following considerations: (1) Family Dollar is already deeply involved in the FTC’s review of the company’s transaction with Dollar Tree; (2) the FTC’s antitrust analysis in retail mergers is well established; (3) the FTC has already seen extensive evidence that Dollar General is a major factor in Family Dollar’s pricing; (4) there is a substantial risk that the FTC will assert that a transaction between Family Dollar and Dollar General will lead to higher pricing, regardless of how Dollar General sets its own prices; (5) Dollar General does not assert that Family Dollar has no effect on its prices; (6) Dollar General has acknowledged its similarity to Family Dollar; (7) the FTC will review the potential impact of the transaction on competition in very narrow local geographies since, as Dollar General notes, the FTC will evaluate competition for "fill-in" trips; (8) the FTC’s detailed review of so many local geographic areas would likely result in a prolonged review process; and (9) Family Dollar and Dollar Tree anticipate receiving a request for additional information ("Second Request") from the FTC.

"Our Board of Directors, with the assistance of outside advisors and consultants, reviewed all aspects of Dollar General’s revised proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed," said Howard R. Levine, Chairman and Chief Executive Officer of Family Dollar. "There is a very real and material risk that the transaction proposed by Dollar General would fail to close, after a lengthy and disruptive review process. Accordingly, our Board has rejected Dollar General’s revised proposal and reaffirmed its support of the transaction with Dollar Tree, which delivers attractive value in the form of immediate upfront cash and upside participation in a combined Dollar Tree-Family Dollar entity, as well as closing certainty."

Headquartered in Matthews, North Carolina, just outside of Charlotte, Family Dollar is a Fortune 300, publicly-held company with common stock traded on the New York Stock Exchange under the symbol FDO.

News: Antitrust NorthCarolinaNews