Dollar General sweetens Family Dollar bid, may go hostile

Tue Sep 2, 2014 1:52pm EDT
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By Sruthi Ramakrishnan

(Reuters) - Dollar General Corp (DG.N: Quote) raised its bid for Family Dollar Stores Inc FDO.N to $9.1 billion, and warned it may turn hostile and appeal directly to shareholders if the new offer was rejected.

The No.1 U.S. deep-discount retailer also said it would pay a break-up fee of $500 million if the deal ran foul of competition law, seeking to overcome Family Dollar's stated reason to reject its earlier $8.95 billion cash offer.

Family Dollar stuck instead with an $8.5 billion cash-and-stock bid from Dollar Tree Inc (DLTR.O: Quote) made in late July.

Family Dollar said on Tuesday its board would review Dollar General's new offer and that it was committed to the Dollar Tree deal.

Any deal will net Family Dollar CEO Howard Levine between $690 million and $750 million, based on his 8.2 percent stake in the company.

Analysts said shareholders could pressurize the company to accept Dollar General's offer.

"Family Dollar's board will be hard pressed to justify rejecting Dollar General's revised offer without risking a massive backlash from its shareholders," BB&T Capital Markets analyst Anthony Chukumba wrote in a note.

Family Dollar's shares rose more than 1 percent to an all-time high of $80.97 on Tuesday, slightly above Dollar General's offer of $80 per share, suggesting some investors held hopes of higher offers.   Continued...

A price sign at a Dollar General store in Arvada, Colorado June 2, 2009.  REUTERS/Rick Wilking