News Column

Family Dollar adopts 'poison pill' to fend off Icahn

June 9, 2014

By Kevin McCoy, @kmccoynyc, USA TODAY

Family Dollar Stores shares soared Monday, closing up 13.4% at $68.62 as the discount retailer adopted a "poison pill" in response to a potential control threat from activist investor Carl Icahn.

Shares of rival Dollar General closed up 7.4% at $62.25 as speculation swirled that Icahn and other major investors could push a merger of the companies.

Family Dollar's board approved the one-year shareholder-rights plan, a move that theoretically could flood the market with company stock and raise the price of a hostile takeover. The adoption, which would block investors from acquiring more than 10% of the firm's shares, came after Icahn disclosed a nearly 9.4% stake Friday that made him Family Dollar's largest stockholder.

The Matthews, N.C.-based company said the plan "will help the board protect shareholders against any person or group gaining control of the company by open market accumulation or otherwise without paying a control premium for all shares.

"The plan applies equally to all current and future stockholders and is not designed to prevent an offer to acquire the company, but rather to allow the board adequate time to consider any and all alternatives," the company said.

Icahn called the poison pill "reprehensible," Bloomberg Television reported.

"Why does it matter if a large shareholder owns 10% or 15%?" Icahn said in an interview with Bloomberg'sTrish Regan, who is also a USA TODAY columnist. "All it does is increase fees for lawyers and make friendly discussions more difficult, which also increases fees."

Icahn's filing with the Securities and Exchange Commission showed he and affiliates collectively paid $265.8 million for Family Dollar shares and options in transactions that began April 7.

The filing said Icahn sees "great long-term potential" in the discount retail industry. It said Family Dollar's financial position is similar to that of CVR Energy, Forest Laboratories, Chesapeake Energy and Biogen -- where Icahn's investment and involvement "helped to generate tremendous returns for all shareholders."

"Hope to continue our streak of value enhancement," Icahn tweeted after the filing.

Family Dollar signaled it was open to talks with Icahn and other potential suitors, saying Friday it was "open to dialogue with all shareholders" and would "welcome input toward the shared goal of enhancing value."

Family Dollar operates more than 8,100 general merchandise retail discount stores in 46 states. Its stores sell apparel, clothing, electronics and other products, generally at prices that range from $1 to $10.

After a quarterly earnings-per-share decline in April, Family Dollar said it planned to cut jobs, close 370 underperforming stores and lower prices on 1,000 items.

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Source: USA Today

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