Dollar Tree, Family Dollar See FTC Analysis Favorable to Their Merger -- 2nd Update

By Michael Calia 

Family Dollar Stores Inc. on Monday said getting the needed regulatory approvals to close its deal with smaller rival Dollar Tree Inc. is a "virtual certainty," while the company again recommended that its shareholders approve the transaction.

Family Dollar, in a letter to shareholders, argued that following talks with the U.S. government, it would be tough for Dollar General Corp., which has made a bigger offer, to divest itself of enough stores to secure regulatory approval.

Dollar Tree, likewise, said Monday that it expects to reach a deal by the end of this month with the Federal Trade Commission over how many stores it must divest to complete its $8.5 billion acquisition of Family Dollar. The discount retailer said it believes it will need to divest fewer than 300 stores after the FTC provided it with a list of about 300 stores that apparently raise antitrust concerns.

Family Dollar said Monday that the count of "presumptively problematic stores" is 310, based on the regulator's most recent analysis. Dollar Tree and Family Dollar both said they expect several stores to be removed from the FTC's list.

Family Dollar Chief Executive Howard Levine said in the letter that the FTC's analysis "reaffirms the statements that we have been making for several months now about the inability of the Dollar General proposal to be consummated on the terms proposed by Dollar General and the certainty of the Dollar Tree merger."

Dollar General didn't immediately respond to a request for comment.

Dollar Tree added that it has identified potential buyers for stores that would have to be divested and that it expects to present a list to the FTC for approval within a month.

Family Dollar said it estimates that, based on the FTC's analysis, there could be as many as 3,500 to 4,000 presumptively problematic stores in Dollar General's unsolicited, $9.1 billion proposal.

The updates from Dollar Tree and Family Dollar come after Family Dollar shareholders pushed back a vote on the deal for a second time to give Dollar General time to try to convince Family Dollar to accept its all-cash offer. Family Dollar, in its letter Monday, urged shareholders to vote for the Dollar Tree deal at the Jan. 22 special meeting, warning that Dollar Tree isn't willing to agree to further adjournments.

Dollar General made an unsolicited bid over the summer after Family Dollar and Dollar Tree announced their agreement. Family Dollar has resisted Dollar General's offers because of regulatory concerns over the amount of stores it would have to close to meet antitrust requirements. The FTC has been reviewing both potential transactions.

Write to Michael Calia at [e-mail]

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