CHESAPEAKE, VA. AND MATTHEWS, N.C. — Dollar Tree Inc. (NASDAQ: DLTR) and Family Dollar Stores Inc. (NYSE: FDO) have entered into a definitive merger agreement under which Dollar Tree will acquire Family Dollar in a cash and stock transaction valued at approximately $8.5 billion. The value of the consideration is $74.50 per share, a 22.8 percent premium over Family Dollar's closing stock price as of Friday.
The transaction, which has been unanimously approved by the boards of directors of both companies, is expected to close by early 2015, at which time the Family Dollar shareholders will receive $59.60 in cash and $14.90 equivalent in Dollar Tree shares.
“This is a transformational opportunity,” says Bob Sasser, CEO of Dollar Tree. “With the acquisition of Family Dollar Stores, Dollar Tree will become a leading discount retailer in North America, with more than 13,000 stores in 48 states and five Canadian provinces, sales of over $18 billion, and more than 145,000 associates on our team.”
Dollar Tree will continue to operate under the Dollar Tree, Deals, and Dollar Tree Canada brands, and will operate under the Family Dollar brand upon closing.
Howard Levine, CEO of Family Dollar, will remain with the company and report directly to Sasser. Upon closing, Howard will become a member of the Dollar Tree board of directors.
“Today's announcement represents the successful culmination of a comprehensive strategic review process that our board of directors, working with its financial and legal advisors, began this past winter,” says Levine. “This combination will enable Family Dollar to accelerate efforts to improve the business and will benefit our dedicated team members who will now be part of a larger, more diverse organization.”
At closing, Family Dollar shareholders will own no less than 12.7 percent and no more than 15.1 percent of the outstanding common stock of Dollar Tree.
Levine and Trian Fund Management LP and funds managed by it, which collectively own approximately 16 percent of the outstanding stock of Family Dollar, have entered into voting agreements in support of the merger.
Dollar Tree intends to finance the acquisition through a combination of existing cash on hand, bank debt and bonds. In connection with the transaction, Dollar Tree has received a financing commitment from JPMorgan Chase Bank, N.A. with the bank debt syndication and bond offering expected to occur prior to closing.
The transaction is subject to Family Dollar stockholder approval, expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.
J.P. Morgan Securities LLC acted as the financial advisor to the board of directors of Dollar Tree, and J.P. Morgan Chase Bank, N.A. provided bridge financing for the transaction. Wachtell, Lipton, Rosen & Katz and Williams Mullen acted as legal counsel to Dollar Tree in connection with the transaction.
Morgan Stanley & Co. LLC acted as exclusive financial advisor to the board of directors of Family Dollar in connection with the transaction. Cleary Gottlieb Steen & Hamilton LLP acted as legal counsel to Family Dollar in connection with the transaction.
Dollar Tree Inc. operated 5,080 stores in 48 states and five Canadian provinces as of May 3, 2014, with total retail selling square footage of 44 million. The Chesapeake, Virginia-based retailer’s stock price closed at $54.22 per share on Friday, up slightly from $52.94 per share one year ago.
Family Dollar Stores Inc. operates more than 8,200 stores in rural and urban settings across 46 states. The Matthews, North Carolina-based company’s stock price closed at $60.66 per share on Friday, down from $68.50 per share one year ago.
— John Nelson