Family Dollar rejects $9-bn Dollar General offer, accepts lower bid from Dollar Tree

Family Dollar Stores Inc said yesterday it had turned down a $9-billion offer from Dollar General Corp in favour of a lower bid from Dollar Tree Inc, over concerns the Dollar General deal would not be able to pass anti-trust hurdles, Bloomberg reported.

The board was unanimous in its rejection of the Dollar General proposal. It reaffirmed last month's pact to merge with Dollar Tree, Family Dollar said in a statement yesterday. Dollar Tree had offered $8.5 billion, excluding debt.

"Our board reviewed, with our advisers, all aspects of Dollar General's proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed," chief executive officer Howard Levine said in the statement.

The Dollar General offer, made this week, would have seen the merger of the two largest dollar-store chains in the US, consolidating almost 20,000 stores under a combined entity (See: Dollar General bids $8.95 bn for Family Dollar Stores).

While Dollar General was readying to sell off 700 locations to align with regulator's requirements, Family Dollar believes it would need to unload a larger number than that, according to a person familiar with the company's thinking.

Dollar General CEO Rick Dreiling had in a letter to the board Wednesday, sought to address the concerns of Family Dollar board. "We are confident that we will be able to quickly and efficiently resolve any potential antitrust issues," he wrote in the letter. "We believe that the number of store divestitures contained in our offer letter is more than sufficient to take this issue completely off the table."

Meanwhile Dreiling, said in a statement that his company was disappointed with Family Dollar's decision, AP reported. He said the company had done an extensive anti-trust analysis that confirmed that its proposal could be completed.

Dollar General added, it would share its analysis with Family Dollar and that it still remained confident it could resolve regulatory concerns about competition.

Family Dollar and Dollar General operate businesses that have greater similarity than Dollar Tree. The two sell items at a variety of prices in contrast to Dollar Tree, where all items are priced $1.