By Chelsey Dulaney
Family Dollar Stores Inc. has delayed the shareholder vote on
its $8.5 billion deal to be bought by Dollar Tree Inc. as the
discount retailer awaits an update on the divestitures U.S.
antitrust regulators will require to approve the deal.
Family Dollar said it expects an update by the end of the first
week of December on the Federal Trade Commission's review of the
merger. Family Dollar pushed back the vote to Dec. 23 from Dec.
11.
Dollar Tree has said it would be willing to divest as many
stores as possible--or sensible--to get its deal done, and the
companies amended their merger agreement to reflect that
commitment.
Initially expected to close in November, the deal is aimed at
consolidating the market for serving low-income shoppers and
building a stronger competitor to rivals like Wal-Mart Stores
Inc.
The Wall Street Journal reported in September that Dollar Tree's
conversations with the FTC have left it more confident that the
acquisition can be approved with some divestitures of stores. The
FTC's initial review looked at how pricing is set in markets where
Family Dollar and Dollar Tree stores are within 3 miles of each
other, and the fact that Dollar Tree primarily sells products for
$1 shows that the stores have little effect on each other, a person
familiar with the matter said.
Meanwhile, larger rival Dollar General Corp. is also in talks
with the FTC about a potential acquisition of Family Dollar. Its
$9.1 billion unsolicited bid was shot down in September by the
company, which claimed the antitrust risks were too high.
Dollar General has said it would be willing to divest up to
1,500 stores and added Wednesday that the talks with the FTC are
making good progress and it intends to provide an update in the
coming weeks to ensure Family Dollar investors can make an informed
decision ahead of the vote.
The New York Post reported Wednesday that Dollar General could
be required to divest more than 4,000 stores--or about 20% of the
total chain--to get FTC approval. Sterne Agee analysts responded to
that report in a research note saying their biggest concern isn't
the closure of that many locations, but whether Dollar General
could realistically find a buyer for the stores. The analysts noted
that both are required.
Family Dollar has remained unswayed by Dollar General's
argument, saying it had produced a mountain of evidence in
antitrust discussions showing how Dollar General is a big rival and
a factor in determining its prices.
Family Dollar Chief Executive Howard Levine has said there was a
"very real and material risk" that Dollar General's offer would
fail to pass a lengthy regulatory process.
The two chains run very similar businesses selling a variety of
consumable and household products at a range of prices. Both chains
confirmed last month that they received requests for additional
information from the FTC regarding Dollar General's bid.
Dollar General's tender offer, worth $80 a share, remains open
until Dec. 31.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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