US discount retailer Dollar General has raised its bid for rival store Family Dollar to almost $9.1 billion (£5.51 billion). The discount chain made this offer today (September 2nd) in a renewed effort to win over its competitor from a rival $8.5 billion deal with Dollar Tree.
Family Dollar had rejected the previous offer of nearly $9 billion and said that the number of Dollar General stores could break competition law.
Under the terms of the revised offer, Dollar General will pay $80 a share, up from its original bid of $78.50 a share and from Dollar Tree’s $74.50-a-share bid. It has also agreed to get rid of 1,500 stores, more than double its last proposition of 700. The Tennessee company has also agreed to pay $500 million to Family Dollar if the deal is affected by anti-trust regulations.
“We are confident that our enhanced proposal sufficiently addresses any concerns that led Family Dollar’s board of directors to reject our prior proposal without any discussions between our companies,” Rick Dreiling, Dollar General’s chairman and chief executive, said in a statement.
The chairman, who said in June that he would resign within a year, has now changed his mind and says he will stay on as chief executive officer until May 2016 to do this deal, Forbes reports.
Dollar General has previously said that a deal for Family Dollar would create synergies of between $550 million and $600 million within three years, mostly from cost savings. If combined, they would have about $28 billion in annual revenue.
While Dollar Tree caters to middle-class consumers and sells most items for $1, Dollar General and Family Dollar both focus on low-income shoppers.
"Dollar General can more easily justify a higher price because of the greater potential operating synergies," Erik Gordon, a professor at the University of Michigan’s Ross School of Business told Bloomberg. Still, Dollar Tree may have incentive to come back with a counteroffer, he said. “The acquisition would do more to transform Dollar Tree’s business."
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