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By Jef Feeley
Sept. 10 — Family Dollar Stores Inc. investors won a bid to fast-track lawsuits opposing rival Dollar Tree Inc.'s $8.5 billion buyout bid for the discount chain that is also being pursued by Dollar General Corp.
The Delaware Chancery Court's Andre Bouchard Sept. 10 accepted Family Dollar's offer to speed up an exchange of documents outlining the discount retailer's decision to spurn an $80-per-share offer from Dollar General and accept Dollar Tree's $74.50-a-share cash and stock offer. Family Dollar officials have said antitrust concerns prompted them to back Dollar Tree's bid.
Family Dollar's push to close the Dollar Tree deal by November leaves disgruntled shareholders with a “little over two months” to have their challenge to the buyout heard, Donald Enright, a lawyer for Family Dollar investors, told Bouchard at a hearing in Wilmington, Delaware.
The ruling comes as Goodlettsville, Tennessee-based Dollar General announced Sept. 10 that it was taking its buyout offer directly to Family Dollar shareholders and that it could overcome antitrust concerns about the merger, which would create a discount retail chain with 20,000 locations.
Family Dollar, based in Matthews, North Carolina, said in a statement it was reviewing the tender offer and advised shareholders not to take action until it could make a recommendation.
Although Bouchard denied shareholders' request for an injunction to block the deal, he accepted the company's offer to speed up information exchanges about Dollar Tree's and Dollar General's bids. He said he will meet with lawyers in two weeks to review whether Family Dollar produced sufficient documents. Such information exchanges often take months to complete.
Nicholas Leasure, a Family Dollar spokesman from the New York-based public relations firm of Joele Frank Wilkinson Brimmer & Katcher, declined to comment.
The bidding war over Family Dollar began in July, when the company agreed to be acquired by Chesapeake, Virginia-based Dollar Tree. That deal would merge the discount retail market's second- and third-largest companies. Dollar General then stepped in with an unsolicited bid in August, aiming to maintain its perch atop the industry.
After that offer was rejected because of antitrust concerns, Dollar General bumped its bid to $80 a share in cash. Along with the sweetened offer, it pledged to divest itself of as many as 1,500 locations to placate regulators. It also said it would pay Family Dollar $500 million if the deal failed to win approval.
Family Dollar executives are skeptical of Dollar General's vow to sell off stores to address antitrust concerns, Mitchell Lowenthal, one of the company's lawyers, told Bouchard.
The language of Dollar General's offer to divest the stores indicates “they don't really mean” to sell all 1,500 locations, Lowenthal said. It raises questions about whether the offer is “real,” he added.
In snubbing Dollar General's bid, Family Dollar officials said in a statement Sept. 10 that their contacts with regulators on the Dollar Tree offer gave them insight into the antitrust hurdles of any potential deal. They noted Family Dollar's pricing is often determined by the levels set by nearby Dollar General stores, a potential red flag for regulators.
Family Dollar and Dollar General have similar business models, with the chains selling products at multiple prices and mostly catering to low-income shoppers. Dollar Tree, in contrast, attracts more middle-class consumers and sells most of its items at $1.
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