Family Dollar Stores Inc. spurned a $9 billion offer from Dollar General Corp. in favor of a lower bid from Dollar Tree Inc., saying it was concerned the Dollar General deal wouldn't be able to pass antitrust hurdles.
Family Dollar's board has unanimously rejected the Dollar General proposal and reaffirmed last month's agreement to merge with Dollar Tree, according to a statement today.
"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 Howard Levine said in the statement.
The Dollar General transaction, proposed this week, would merge the two largest dollar-store chains in the United States, creating a fleet of almost 20,000 stores. While Dollar General planned to sell 700 locations to appease regulators, Family Dollar believes it may have to unload a larger number than that, according to a person familiar with the company's thinking.
Dollar General CEO Rick Dreiling had sought to assuage Family Dollar's concerns in a letter to the board Wednesday, saying experienced counsel and an economist had reviewed the antitrust question.
"We are confident that we will be able to quickly and efficiently resolve any potential antitrust issues," Dreiling said 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." Levine said today that the letter did nothing to address the antitrust issues.