News Column

Chesapeake-based Dollar Tree to buy Family Dollar for $8.5 billion

July 28, 2014

By Tara Bozick, Daily Press (Newport News, Va.)

July 28--Chesapeake-based Dollar Tree Inc. plans to acquire Family Dollar Stores Inc. in a cash and stock deal valued at about $8.5 billion, the companies announced Monday.

The boards of directors of both companies have unanimously approved the deal, according to a news release. Per the agreement, Family Dollar shareholders would receive $74.50 for each share -- $59.60 in cash and $14.90 equivalent in Dollar Tree shares -- which is a 22.8 percent premium over the company's closing price as of Friday.

The deal is expected to close early next year and values Family Dollar at an enterprise value of about $9.2 billion.

"This is a transformational opportunity," Dollar Tree CEO Bob Sasser said in a prepared statement.

The combination of the two Fortune 500 companies would have more than 13,000 stores across the U.S. and Canada with annual sales over $18 billion.

Dollar Tree operates 5,080 stores and Family Dollar operates more than 8,200 stores. The Family Dollar stores would continue operating under the Family Dollar brand.

Dollar Tree says it will fund the acquisition with cash, bank debt and bonds with a financing commitment from JPMorgan Chase Bank, N.A.

Sasser said the acquisition diversifies Dollar Tree and positions the company for further growth. Dollar Tree markets selling everything for $1 or less while Family Dollar sells much of its merchandise for $1 to $10.

Family Dollar had been reviewing its financial strategy and potential partners this past winter, Chairman and CEO Howard R. Levine said in the news release.

"This combination will enable Family Dollar to accelerate efforts to improve the business and will benefit our dedicated Team Members who will now be part of a larger, more diverse organization," Levine said.

More of Family Dollar's stores are in urban and rural locations while Dollar Tree has focused on suburbs. The combination would help Dollar Tree in sourcing and procurement and distribution.

Matthews. N.C.-based Family Dollar is traded as FDO on the New York Stock Exchange with about 114 million shares outstanding. Dollar Tree trades on NASDAQ as DLTR with about 206.8 million shares outstanding.

Shares of Family Dollar rose about 25 percent to $75.50 in premarket trading on Monday, Reuters reports. Dollar Tree shares rose 8.8 percent to $59.


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Source: Daily Press (Newport News, VA)

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