Dollar General raises Family Dollar bid to $9.1B

by: Jim Bradley Updated:

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MATTHEWS, N.C. - Two weeks after being told no by Family Dollar's Board of Directors, Tennessee-based Dollar General is making another bid for the company.
 
Dollar General announced Tuesday it was offering a total of $9.1 billion to buy all outstanding shares of Family Dollar. Experts said it will be harder for Family Dollar to say no again. 

RELATED: Family Dollar rejects Dollar General offer
 
"The board can continue to say no but as the offers increase, they put themselves in a little bit of jeopardy because they have a responsibility to the shareholders," said Charlotte economist John Connaughton.
 
Last month, Family Dollar agreed in principle to a merger with another dollar-store player, Dollar Tree.

RELATED: Dollar General enters bidding for Matthews-based Family Dollar
 
But that offer is nearly 7 percent less than the new bid by Dollar General. Dollar General is also offering to close as many as 1,500 of its stores if the government has concerns about anti-trust issues.
 
In a letter to the Family Dollar Board of Directors, Dollar General said it’s disappointed that the two companies haven't been able to engage in formal merger talks.
 
Family Dollar issued a statement saying it is reviewing the new offer but has not backed off its preference for a deal with Dollar Tree. Analysts said combining with Dollar Tree would likely leave the Family Dollar name and some of its management team intact. In addition, Dollar Tree has indicated it keep many of the 1,500 workers employed at Family Dollar's Matthews headquarters and distribution center. Dollar General has given no such assurances.
 
Still, the more lucrative offer is likely to be attractive to some shareholders who may balk if Family Dollar rejects the new higher bid.
 
"I would be surprised, if they (Family Dollar) say no again, not to see some shareholders decide to file suit," said Connaughton.
 
In addition, Connaughton said a hostile takeover effort by Dollar General is another possibility, in which Dollar General could attempt to buy enough Family Dollar shares to take control of the board of directors.  Dollar General seemed to suggest as much in a letter written to Family Dollar executives. 
 
"In the event you refuse to engage with us regarding our revised proposal, we will consider taking out persuasive and superior proposal directly to your shareholders," the letter said. 

LINK: Family Dollar confirms receipt of revised unsolicited proposal from Dollar General