Dollar Tree to Shed Some Stores for Family Dollar Deal Approval--Update

By Chelsey Dulaney 

Dollar Tree Inc. on Friday gave an optimistic update on its pending $8.5 billion acquisition of Family Dollar Stores Inc., saying it will have to divest itself of a "relatively small" number of stores to secure U.S. antitrust approval of the deal, which could close as early as February.

Dollar Tree said it would work with the Federal Trade Commission over the next few weeks to determine what divestitures will be required, but said it would likely be a small number that won't be material to its plans for the combined company.

Dollar Tree has said it would be willing to shed as many stores as possible--or sensible--to get its deal done, and the companies amended their merger agreement to reflect that commitment.

Initially expected to close in November, the deal is aimed at consolidating the market for serving low-income shoppers and building a stronger competitor to the likes of Wal-Mart Stores Inc.

Meanwhile, larger rival Dollar General Corp. also is in talks with the FTC about a potential acquisition of Family Dollar. Its $9.1 billion unsolicited bid was shot down in September by Family Dollar, which claimed the antitrust risks were too high.

Dollar General has said it would be willing to divest itself of up to 1,500 stores, but Family Dollar's chief executive, Howard Levine, has said there is a "very real and material risk" that Dollar General's offer would fail to pass a lengthy regulatory process.

At the heart of the FTC's review are the similarities among the discount retailers' businesses and how a combination could impact competition and pricing. Dollar General and Family Dollar both sell a variety of consumable and household products at a range of prices, while Dollar Tree primarily sells goods for $1 or less.

Dollar Tree on Friday touted the regulatory uncertainty over Dollar General's bid, saying the FTC may require divestitures "far in excess" of the 1,500 stores Dollar General has said it would shed.

A representative for Dollar General couldn't immediately be reached for comment.

Family Dollar shareholders are scheduled to vote on the Dollar Tree deal at a Dec. 23 meeting.

Write to Chelsey Dulaney at [e-mail]

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