Dollar Tree to buy Family Dollar for $8.5B
Dollar Tree agreed Monday to buy Family Dollar Stores for about $8.5 billion in cash and stock, uniting two of North America’s biggest deep-discount retailers.
The deal comes amid pressure on Family Dollar by the activist investor Carl C. Icahn, who urged the company last month to explore a sale of itself. But Family Dollar said in a statement that it had been exploring strategic options since the winter.
Under the terms of Monday’s deal, Dollar Tree will pay $74.50 for each share of Family Dollar. The bid is made up of $59.60 a share in cash and Dollar Tree stock worth about $14.90. Including debt, the deal values the target company at about $9.2 billion.
The bid represents a premium of nearly 23 percent to Family Dollar’s closing price Friday.
Shareholders representing about 16 percent of Family Dollar’s shares, including its chief executive, Howard R. Levine, and the investment firm of the billionaire Nelson Peltz, have already agreed to support the deal.
Together, the two companies will have more than 13,000 stores in 48 states and in Canada, and more than $18 billion in revenue. Dollar Tree, which sells its wares for $1 or less, intends to keep Family Dollar – which has a number of low-cost price points – as a separate brand.
“This is a transformational opportunity,” Bob Sasser, Dollar Tree’s chief executive, said in a statement. “Throughout our history, we have strived continuously to evolve and improve our business. This acquisition, which enhances our footprint and diversifies our company, will enable us to build on that progression, and importantly, positions Dollar Tree for accelerated growth.”
The companies expect to realize about $300 million in annual cost savings by the end of the third year after closing, which is expected by early next year.
It is unclear whether the transaction will please Icahn, who owns a nearly 10 percent stake and who had threatened to wage a potentially messy fight for seats on Family Dollar’s board if it did not pursue a sale.
But Peltz’s Trian Partners said it was pleased by the deal.
“Trian strongly believes that the combination with Dollar Tree represents the best path forward for Family Dollar and is a great outcome for all of the company’s shareholders,” a representative for the hedge fund, which owns a 7.3 percent stake, said in a statement.
Icahn was not immediately available for comment.