By Paul Ziobro and Michael Calia
Patience is wearing thin in the drawn-out battle for Family
Dollar Stores Inc.
The chief executive of Dollar Tree Inc., Bob Sasser, warned his
counterpart at Family Dollar that he won't accept any further
delays of a shareholder vote on the companies' $8.5 billion deal. A
vote on the acquisition, which has been approved by Family Dollar's
board, has been delayed twice as the discount chain's shareholders
consider the prospect of a better offer in light of a rival
takeover approach from Dollar General Corp.
"Dollar Tree is not willing to agree to any further adjournments
of the shareholder meeting," Mr. Sasser wrote in a letter dated
Jan. 9 to Family Dollar CEO Howard Levine. "After two delays, we
have been more than reasonable but have reached the end of our
patience."
Pushing the vote beyond its scheduled Jan. 22 date not only adds
uncertainty, but also raises Dollar Tree's borrowing costs, Mr.
Sasser wrote. The CEO didn't go as far as saying he would rescind
the offer without a Jan. 22 vote. But the stern letter ratchets up
the pressure on Dollar General to sweeten its offer, either by
raising the limit on the number of stores it would agree to sell or
increasing its offer.
Shares of all three companies closed lower Monday amid a broad
decline in stocks.
A spokeswoman for Dollar General said the company would provide
an update on its bid before next week's vote.
What looked to be a straightforward retail industry merger
turned into a bitter, three-way fight last summer when Dollar
General jumped in with an unsolicited takeover proposal now valued
at $9.1 billion.
Family Dollar has rejected Dollar General's overtures, arguing
that the Federal Trade Commission would require far more stores to
be divested in a tie-up than the 1,500 Dollar General has offered
to sell. On Monday, it said there could be as many as 4,000
"presumptively problematic" stores in such a deal and urged
shareholders to vote in favor of the lower offer, saying it is more
likely to close.
Dollar Tree said that it expects it will have to divest itself
of fewer than 300 stores to appease antitrust regulators.
Mr. Levine, in a letter to shareholders, said feedback from the
FTC "reaffirms the statements that we have been making for several
months now about the inability of the Dollar General proposal to be
consummated on the terms proposed by Dollar General and the
certainty of the Dollar Tree merger."
Dollar Tree added that it has identified potential buyers for
stores that would have to be divested and that it expects to
present a list to the FTC for approval within a month. Family
Dollar said the merger with Dollar Tree could close as soon as
March.
Family Dollar argues that losing the Dollar Tree offer would
leave the company without a merger partner and in a dire situation.
Family Dollar's performance has been flailing, and Mr. Levine last
week acknowledged the company has lost some key executives in
recent months because of the uncertainty.
The renewed tussle over the deal comes after Family Dollar
shareholders voted by a margin of 72 million shares to 15 million
shares in late December to delay a decision on the Dollar Tree deal
and give Dollar General more time to time to try to convince Family
Dollar to accept its all-cash offer.
Write to Paul Ziobro at Paul.Ziobro@wsj.com and Michael Calia at
michael.calia@wsj.com
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