Dollar General Enhances Proposal to Acquire Family Dollar
Tue, 02 Sep 2014
Raises All-Cash Consideration to $80 per Share
Offers to Divest up to 1,500 Stores if Required by the FTC
Includes a $500 million Reverse Break-Up Fee
Sets the Record Straight on Antitrust
GOODLETTSVILLE, Tenn.--(BUSINESS WIRE)--
Dollar General Corporation (NYSE:DG) today announced that it has sent an
enhanced acquisition proposal to the Board of Directors of Family Dollar
Stores, Inc. (NYSE: FDO). Under the terms of the revised proposal,
Dollar General would increase its all-cash proposal for all outstanding
shares of Family Dollar to $80.00 per share. To provide even greater
certainty of consummation to the Family Dollar Board, Dollar General
also increased the number of stores that it would be willing to agree to
divest to 1,500 if ordered by the Federal Trade Commission (“FTC”) and,
as further evidence of its confidence in its ability to obtain antitrust
approval, has agreed to pay a $500 million reverse break-up fee to
Family Dollar relating to antitrust matters. All other terms and
conditions of the proposal remain unchanged.
Revised Transaction Terms
Under the terms of the revised acquisition proposal, Dollar General
would agree to pay the Family Dollar shareholders $80.00 per share in
cash for all outstanding shares, an amount that further increases the
superior value of Dollar General’s proposal and provides immediate
liquidity for Family Dollar shareholders. Dollar General’s revised
proposal provides Family Dollar’s shareholders with approximately $640
million of additional aggregate value over Dollar Tree’s offer and
represents a premium of 31.9 percent over the closing price of $60.66
for Family Dollar stock on the day prior to the Dollar Tree announcement.
Based on the extensive work and analysis performed by its experienced
antitrust counsel and economist, Dollar General believes the 700 store
divestiture commitment in its prior proposal provided more than
sufficient cushion to clear any FTC review. Nonetheless, to demonstrate
its commitment to the proposed transaction and the value it brings to
Family Dollar shareholders, and to provide the Family Dollar Board with
a proposal that indisputably permits it to engage with Dollar General
under the terms of its existing merger agreement, Dollar General’s
revised proposal states that it would be willing to agree to divest up
to 1,500 stores, if ordered to do so. As further evidence of its
confidence in its ability to obtain antitrust approvals, Dollar General
also has agreed to pay a $500 million reverse break-up fee to Family
Dollar in the event that the transaction is not completed for antitrust
reasons.
Additional Antitrust Analysis
Dollar General began its antitrust analysis well over a year ago and,
since making its proposal on August 18, Dollar General has further
refined its antitrust analysis with its counsel, Simpson Thacher &
Bartlett LLP, and its economist, Compass Lexecon. This analysis has
solidified Dollar General’s confidence in its ability to complete the
potential transaction on the terms initially proposed.
In addition, Dollar General has engaged additional counsel, Boies,
Schiller & Flexner LLP, to independently review its antitrust work. The
independent review validated Dollar General’s analysis that the proposed
transaction can be completed on the terms previously proposed.
Dollar General’s antitrust work has included all of the major analyses
that would be performed by the FTC and its economist in connection with
a review of this proposed transaction. Given Dollar General’s advisors’
experience, as well as the extensive analysis performed, the Company has
the highest confidence that its antitrust analysis and conclusions are
correct. This leads Dollar General to believe that perhaps Family
Dollar’s advisors are analyzing this transaction as if it were a
potential grocery store merger or utilizing data that tells a story much
different than Dollar General's documents and data. Dollar General is
confident that this matter would not be evaluated as a traditional
grocery store merger and that, as the acquirer, Dollar General’s
documents and data would be more important to the FTC in its analysis
than those of Family Dollar.
“We are confident that our enhanced proposal sufficiently addresses any
concerns that led Family Dollar’s Board of Directors to reject our prior
proposal without any discussions between our companies,” said Rick
Dreiling, Dollar General’s Chairman and Chief Executive Officer. “Even
as a secondary antitrust review supported our previous proposal, we
revised our offer to demonstrate the seriousness of our commitment. Our
revised proposal provides Family Dollar shareholders with significantly
increased value over the existing agreement with Dollar Tree, as well as
immediate and certain liquidity for their shares. If the Family Dollar
Board fails to seize this opportunity to maximize value for its
shareholders, we will consider taking our superior proposal directly to
the Family Dollar shareholders.”
Goldman, Sachs & Co. is acting as financial advisor to Dollar General
and Simpson Thacher & Bartlett LLP is acting as its legal counsel.
Below is the text of the letter Mr. Dreiling sent on September 2, 2014
to the Board of Directors of Family Dollar:
September 2, 2014
Board of Directors Family Dollar Stores, Inc. 10401 Monroe Road Matthews,
North Carolina 28201
To the Board of Directors of Family Dollar Stores, Inc.:
We were extremely disappointed that our superior all-cash proposal was
rejected by the Family Dollar Board of Directors without any discussions
between our companies. We are confident that if the Family Dollar Board
had agreed to engage with us and our counsel regarding the results of
our extensive antitrust analysis, you would have concluded that our
proposal is reasonably capable of being completed on the terms proposed.
Despite our disappointment, we remain committed to completing a
transaction that will provide your shareholders with superior value to
the existing agreement with Dollar Tree and immediate and certain
liquidity for their shares.
Antitrust Matters
Our antitrust analysis began well over a year ago and has included all
of the major analyses that we would expect the Federal Trade Commission
(“FTC”) and its economist to perform in connection with a review of this
proposed transaction. Since making our proposal on August 18, we have
continued to refine our antitrust analysis with our experienced
antitrust counsel and Compass Lexecon, our economist, and can confirm
that this additional work has only increased our confidence in our
ability to complete the proposed transaction and that the 700 store
divestiture commitment in our prior proposal provided more than
sufficient cushion to clear any FTC review.
In addition, to further validate our analysis, we have engaged Richard
Feinstein of Boies, Schiller & Flexner LLP to independently review our
thorough antitrust work. As you may know, until June of 2013 Mr.
Feinstein was the Director of the Bureau of Competition at the FTC.
After a review of our work completed to date, Mr. Feinstein has informed
us that he concurs in our view that the transaction can be completed on
the terms previously proposed.
Given our advisors' experience, as well as the extensive analysis we
have performed, we have the highest confidence that our antitrust
analysis and conclusions are correct. This leads us to believe that
perhaps Family Dollar's advisors are analyzing this transaction as if it
were a potential grocery store merger or utilizing data that tells a
story much different than Dollar General's documents and data.
This proposed transaction is not a traditional grocery store merger, and
we do not believe that the FTC will take this approach. Rather, as
outlined further below, we believe that the FTC will evaluate this
transaction as involving a “fill-in” shop/trip instead of a
“destination” or “stock-up” shop/trip.
Additionally, although we do not yet have visibility to Family Dollar’s
documents and data, we do not believe that those documents and data will
be the focus of the FTC’s review. Instead, we believe that, as the
acquirer, Dollar General’s documents will be much more important to the
FTC, and those documents and data will demonstrate, among other things,
that:
Walmart, not Family Dollar, is the primary driver regarding Dollar
General’s strategic and pricing decisions;
Approximately 75% of Dollar General’s SKUs are nationally priced
(i.e., not subject to zone pricing);
Dollar General views the competitive market broadly, factoring in a
wide variety of retail outlets, including mass, club, drug and
grocery, as well as independent retailers, each of which acts as a
competitive constraint on Dollar General’s pricing;
Each of the above retail outlets sells the sort of items that Dollar
General sells, and there is nothing unique about these products; and
Dollar General is a fill-in shop/trip, not a destination or stock-up
shop/trip. Dollar General’s customers are going to their primary
destination stores weekly and have access to all of the same SKUs
which are available for fill-in at Dollar General.
We look forward to the time when our companies and their advisors are
able to discuss these matters more openly with one another once you have
taken the appropriate steps under your existing merger agreement to
allow that to happen.
Revised Offer
We have listened carefully to the reasons you articulated for the
rejection of our proposal and, while we disagree with your rationale, we
are revising our previous proposal in an effort to further demonstrate
our commitment to a transaction with Family Dollar. To that end, we
hereby revise our proposal as follows:
1. We agree to pay the Family Dollar shareholders $80.00 per share in
cash for all outstanding shares, an amount that provides even more value
and immediate liquidity for their shares. Our revised proposal provides
Family Dollar’s shareholders with approximately $640 million of
additional aggregate value over Dollar Tree’s offer and represents a
premium of 31.9% over the closing price of $60.66 for Family Dollar
stock on the day prior to the Dollar Tree announcement.
2. As discussed above, based on the extensive work and analysis
performed by our experienced antitrust counsel and economist, we do not
believe that we would be ordered to divest more than the number of
stores contained in our original offer (i.e., 700), if that many, and we
believe that after we have shared that analysis with your counsel, you
will agree. Nonetheless, to provide you with a concrete proposal that
indisputably allows you to engage with us under the terms of your
existing merger agreement and to demonstrate our commitment to this
proposed transaction and the value it brings to Family Dollar
shareholders, we are willing to agree to divest up to 1,500 stores, a
commitment that provides you with even greater assurance that this
transaction is capable of being completed on the terms proposed.
3. As further evidence of our confidence in our ability to obtain the
required antitrust approvals on the terms we have proposed, we also will
agree to pay a $500 million “reverse break-up fee” to Family Dollar to
eliminate any concerns you have about our ability to obtain such
approvals and further increase the certainty of closing.
Our revised proposal is not subject to any financing condition. Goldman
Sachs and Citigroup Global Markets Inc. have agreed to provide committed
financing for all of the financing necessary to consummate a
transaction. The remaining terms of our prior proposal, including
permitting Family Dollar to pay its customary quarterly dividend
consistent with past practices through closing, continue to apply.
The Board of Directors of Dollar General has unanimously approved this
revised proposal and has authorized us to proceed expeditiously.
Your existing agreement with Dollar Tree permits you to engage in
discussions with us if you believe that our proposal “is reasonably
likely to lead to a Company Superior Proposal” and does not require you
to actually determine our proposal is, at this time, a Company Superior
Proposal. There is no question that our proposal is economically
superior to the existing transaction with Dollar Tree. While we believe
your antitrust analysis has led you to a misplaced initial conclusion
regarding the number of divestitures that may be required, we believe
that the foregoing enhanced proposal and commitments should sufficiently
address any concerns that led you to reject our prior proposal as “not
reasonably likely to be completed on the terms proposed” and that, with
these revised terms, the Family Dollar Board should engage with us. Only
by engaging with us can you ensure that you have fulfilled your duty to
your shareholders to be well-informed and that you have acted in the
best interests of your shareholders to maximize the value of their
shares.
As we noted in our previous letter, we and our advisors stand ready to
meet with you and your advisors to discuss our revised proposal
immediately. We have engaged Goldman, Sachs & Co. as our financial
advisor and Simpson Thacher & Bartlett LLP as our legal advisor in
connection with this transaction.
Please note that this letter is not meant to, and does not, create or
constitute any legally-binding obligation, liability or commitment by us
concerning a proposed transaction, and, other than any confidentiality
agreement we may enter into with you, there will be no legally-binding
agreement between us regarding the proposed transaction unless and until
we enter into a definitive merger agreement with you.
Given the details of our revised proposal, we are certain that you will
conclude that our revised proposal is a “Company Superior Proposal” and
you will take the appropriate steps under your existing merger agreement
with Dollar Tree to enable us to begin discussions so that we may enter
into a definitive merger agreement. However, in the event you refuse to
engage with us regarding our revised proposal, we will consider taking
our persuasive and superior proposal directly to your shareholders, as
we are firmly committed in our belief that a combination of our
companies is in their best interests.
We look forward to hearing from you.
Sincerely,
Rick Dreiling Dollar General Corporation Chairman and Chief
Executive Officer
Forward-Looking Statements
Dollar General includes “forward-looking statements” within the meaning
of the federal securities laws throughout this release. A reader can
identify forward-looking statements because they are not limited to
historical fact or they use words such as “may,” “will,” “could,”
“should,” “would,” “expect,” “believe,” “anticipate,” “project,” “plan,”
“estimate,” “forecast,” “goal,” “objective,” “committed,” “intend,”
“continue,” or “will likely result,” and similar expressions that
concern Dollar General’s strategy, plans, intentions or beliefs about
future occurrences or results, including by way of example and without
limitation plans, intentions and expectations regarding Dollar General’s
proposal to acquire Family Dollar, the financing of a potential
transaction, the anticipated results, benefits, synergies, earnings
accretion, costs, timing and other expectations of the benefits of a
potential transaction, and assumptions and expectations pertaining to
related antitrust matters.
Forward-looking statements are subject to risks, uncertainties and other
factors that may change at any time and may cause actual results to
differ materially from those that Dollar General expected. Many of these
statements are derived from Dollar General’s operating budgets and
forecasts, which are based on many detailed assumptions that Dollar
General believes are reasonable, or are based on various assumptions
about certain plans, activities or events which we expect will or may
occur in the future. However, it is very difficult to predict the effect
of known factors, and Dollar General cannot anticipate all factors that
could affect actual results that may be important to an investor. All
forward-looking information should be evaluated in the context of these
risks, uncertainties and other factors, including those factors
disclosed under “Risk Factors” in Dollar General’s most recent Annual
Report on Form 10-K and any subsequent quarterly filings on Form 10-Q
filed with the Securities and Exchange Commission.
All forward-looking statements are qualified in their entirety by the
cautionary statements that Dollar General makes from time to time in its
SEC filings and public communications. Dollar General cannot assure the
reader that it will realize the results or developments Dollar General
anticipates, including, without limitation, the expected resolution of
antitrust matters or the expected synergies, earnings accretion or
benefits from a potential transaction, or, even if substantially
realized, that they will result in the consequences or affect Dollar
General or its operations in the way Dollar General expects.
Forward-looking statements speak only as of the date made. Dollar
General undertakes no obligation to update or revise any forward-looking
statements to reflect events or circumstances arising after the date on
which they were made, except as otherwise required by law. As a result
of these risks and uncertainties, readers are cautioned not to place
undue reliance on any forward-looking statements included herein or that
may be made elsewhere from time to time by, or on behalf of, Dollar
General.
About Dollar General Corporation
Dollar General Corporation has been delivering value to shoppers for 75
years. Dollar General helps shoppers Save time. Save money. Every day!®
by offering products that are frequently used and replenished, such as
food, snacks, health and beauty aids, cleaning supplies, basic apparel,
house wares and seasonal items at low everyday prices in convenient
neighborhood locations. With more than 11,500 stores in 40 states,
Dollar General has more retail locations than any retailer in America.
In addition to high quality private brands, Dollar General sells
products from America's most-trusted manufacturers such as Clorox,
Energizer, Procter & Gamble, Hanes, Coca-Cola, Mars, Unilever, Nestle,
Kimberly-Clark, Kellogg's, General Mills, and PepsiCo. For more
information on Dollar General, please visit www.dollargeneral.com.
Dollar General Corporation Investors: Mary
Winn Pilkington, 615-855-5536 Emma Jo Kauffman, 615-855-5525 or Media: Brunswick
Group Steve Lipin or Shahed Larson, 212-333-3810 or Dollar
General Corporation Media Hotline, 877-944-DGPR (3477) Dan
MacDonald, 615-855-5209 Crystal Ghassemi, 615-855-5210
