Dollar General (NYSE:DG), the largest U.S. deep-discount retailer, raised its bid for Family Dollar Stores (NYSE:FDO) to $9.1 billion, and warned it may turn hostile and appeal directly to shareholders if the new offer was rejected. Shares advanced in premarket trades.
Dollar General offered $80 a share in cash for Matthews, North Carolina-based Family Dollar, compared with an initial $78.50 bid.
It also said it would pay a break-up fee of $500 million if the deal ran foul of competition law, the reason Family Dollar had cited for its rejection of the earlier $8.95 billion offer. Family Dollar opted instead for an $8.5 billion cash-and-stock bid from Dollar Tree Inc. (NASDAQ:DLTR).
Dollar General is battling with Dollar Tree for control of the chain of more than 8,000 outlets to preserve its lead in the dollar-store market. Family Dollar spurned Dollar General’s initial bid in favor of a $74.50 cash-and stock offer from Dollar Tree, saying it was concerned the deal wouldn’t be able to pass antitrust hurdles.
“We are confident that our enhanced proposal sufficiently addresses any concerns that led Family Dollar’s board of directors to reject our prior proposal,” Rick Dreiling, chairman and chief executive officer of Dollar General, said in the statement.
Family Dollar's shares rose 0.6 percent to $80.30 yesterday, above Dollar General's offer, suggesting some investors held hopes of higher offers. Shares of Dollar General, which increased its all-cash offer by 2 percent, rose 1.3 percent.
In a letter to Family Dollar's board today, Dreiling said: "In the event you refuse to engage with us regarding our revised proposal, we will consider taking our persuasive and superior proposal directly to your shareholders."
The Goodlettsville, Tennessee-based retailer also said today that it will sell as many as 1,500 stores if ordered to do so by the Federal Trade Commission, more than its previous proposal of 700 outlets, to clear the antitrust review.
Playing down antitrust concerns, Dollar General said its documents would show that the products it offers are not unique as they are also available at most mass retailers, drug and grocery stores.
It also said that Wal-Mart Stores, and not Family Dollar, was the primary driver for the company's pricing decisions.
Dollar General and Family Dollar, which offer goods at multiple price points, and Dollar Tree, which sticks to a $1 or less format. cater to less-affluent and cash-strapped Americans still struggling in the wake of the Great Recession.