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DOLLAR GENERAL MAKES $9.7B PROPOSAL TO WOO FAMILY DOLLAR FROM DOLLAR TREE

Dollar General hopes its $9.7 billion offer for Family Dollar Stores will win out. Dollar General recently celebrated its 11,000th store opening in Murfreesboro, Tenn. (pictured above).

GOODLETTSVILLE, TENN. AND MATTHEWS, N.C. — Dollar General (NYSE: DG) has made a proposal to acquire Family Dollar Stores Inc. (NYSE: FDO) for $78.50 per share in cash, in a transaction valued at $9.7 billion. The combination would make Dollar General the largest small-box discount retailer in the United States with nearly 20,000 stores in 46 states and sales of more than $28 billion.

Dollar General's all-cash proposal would provide Family Dollar shareholders with a superior valuation to the $74.50 per share cash/stock offer announced by Dollar Tree Inc. (NASDAQ: DLTR) on July 28, 2014.

“For Family Dollar shareholders, our proposal is financially superior to the current transaction agreement with Dollar Tree and would provide Family Dollar shareholders with a substantial premium and immediate liquidity for their shares,” says Rick Dreiling, Dollar General's chairman and CEO. “For Dollar General shareholders, the proposed combination of Dollar General and Family Dollar would be a significant strategic opportunity to create immediate and lasting shareholder value. For both Dollar General and Family Dollar customers, we would be able to provide better value and greater selection.”

Dreiling continues, “We have the utmost respect for Family Dollar, its leadership and its employees. We look forward to expeditiously entering into constructive discussions with Family Dollar in order to sign a definitive merger agreement that provides enhanced value to Family Dollar shareholders and enables Dollar General to realize the benefits of this combination.”

Dreiling, who led the management team for Dollar General starting in 2008, has agreed to postpone his previously announced retirement and remain in the role of chairman and CEO of the combined company until May 2016, if a merger agreement is signed, in order to oversee the successful integration of the two companies. Beyond that date, Dreiling has also agreed that, if asked by the board of directors and elected by shareholders, he would remain as a board member and would be willing to serve as chairman.

The proposal has the unanimous approval of the board of directors of Dollar General.

Goldman Sachs and Citigroup Global Markets Inc. have agreed to provide committed financing for all of the financing necessary to consummate the transaction. The financing includes estimated fees and expenses, including the $305 million termination fee payable to Dollar Tree in the event Family Dollar terminates the existing merger agreement to enter into a merger agreement with Dollar General.

In an effort to address any potential antitrust issues, Dollar General is prepared to divest up to 700 retail stores in order to achieve the requisite approvals, which is approximately the same percentage of the total combined stores represented by the 500 U.S. store divestiture commitment in the Dollar Tree merger agreement.

Goldman, Sachs & Co. is acting as financial advisor to Dollar General, and Simpson Thacher & Bartlett LLP is acting as its legal counsel.

Goodlettsville-based Dollar General’s stock price closed Friday, Aug. 15 at $57.44 per share, up from $54.09 per share at this time last year.

The stock price for Matthews-based Family Dollar Stores closed at $76.11 per share on Friday, up from $70.76 per share at this time last year.

— John Nelson

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