Dollar General Corp. (NYSE:DG)’s bid for Family Dollar Stores, Inc. (NYSE:FDO) may soon come to a finish, after the discount retailer hinted that it would need additional time for its bid to get approval from regulators. In a statement, Dollar Green noted that certifying compliance with the second request for information from the Federal Trade Commission will take up to February 10, and it will take 30 days more for the agency to act on the matter, with the possibility that the regulator may file an antitrust suit to stop the transaction.
Dollar General Corp. (NYSE:DG)’s offer of $9.1 billion for taking over Family Dollar is higher than a competing offer from Dollar Tree, Inc. (NASDAQ:DLTR) at $8.5 billion. Pending Dollar General’s bid review with the FTC, as well as the attendant antitrust risk, Family Dollar’s shareholders may elect to accept the offer from Dollar Tree when it votes on the matter by January 22. Furthermore, Family Dollar itself has been prodding shareholders to take Dollar Tree’s bet, arguing that Dollar General’s bid faces regulatory impediments as much as it will require closure of over 1,500 stores. Because of the divestitures required by regulators, Dollar General’s bid is economically unviable, according to opponents.
In a recommendation issued on Wednesday, proxy firm advisor ISS (Institutional Shareholder Service) also advised Family Dollar’s investors to take the Dollar Tree bid. “Shareholders should vote FOR the Dollar Tree transaction, which offers significant value and near certainty of closure,” ISS said, noting that Dollar General Corp. (NYSE:DG)’s deal has not shown any significant improvement in certainty. Previously, ISS allowed for the possibility that Dollar General may be able to clear the antitrust issues in its proposal.
In its review of the two competing offers for Family Dollar, the FTC has pointed out up to 5,850 stores in the Dollar General Corp. (NYSE:DG) deal as undermining industry competition, while only 310 stores was identified by the agency as problematic from the Dollar Tree offer. “We now expect the Dollar Tree transaction will be approved by FDO shareholders on January 22,” Stifel Financial Corp. analyst Taylor LaBarr wrote in a note to clients, as quoted by Bloomberg.
This article has been written by Nonito Guntan.