Dollar Tree to sell 330 Family Dollar Stores to Sycamore Partners
30 May 2015
US discount retailer Dollar Tree Inc yesterday struck a deal to sell 330 stores of Family Dollar Stores to private equity firm Sycamore Partners, in order to obtain regulatory approval for its $8.5-billion planned merger with Family Dollar.
In July last year, Dollar Tree struck a deal to buy Family Dollar Stores in order to become a leading discount retailer in North America, with over 13,000 stores in 48 states and five Canadian Provinces, and sales of over $18 billion (See: Family Dollar rejects $9-bn Dollar General offer, accepts lower bid from Dollar Tree).
The sale of the 330 stores account for about $45.5 million of operating income for Family Dollar, Dollar Tree said in a statement.
Post closing of the Dollar Tree - Family Dollar Stores deal, Sycamore intends to operate the stores under the Dollar Express banner.
''We look forward to drawing on our extensive experience with similar corporate carve-outs in acquiring and operating this attractive portfolio of 330 stores, which have an annual run-rate of approximately $500 million in sales," said Peter Morrow, a managing director at Sycamore Partners. ''We have a proven track record of retail success and an experienced leadership team.''
Dollar Tree, a Fortune 500 company, operates 5,454 stores in 48 states and five Canadian Provinces, with total retail selling square footage of 47.2 million, while Family Dollar Stores, offers a mix of name brands and quality, private brand merchandise in more than 8,200 stores in rural and urban settings across 46 US states.
Dollar stores had been a popular choice for US consumers in a weak economy, with competition for price sensitive customers hotting up, particularly as Wal-Mart Stores opened more small-format stores.
According to Barbara Kahn, a professor at Wharton, the companies were trying to rally forces in order to compete more effectively.
Many large retailers servicing the low income market segments reported disappointing quarterly sales at their established stores, revealing tighter control over expenses as also a shift in preferences to stores nearer to home.
The proposed deal is pending approval before US Federal Trade Commission.
