Family Dollar urges shareholders to approve Dollar Tree takeover offer

Family Dollar chief executive says closing the bid is a “virtual certainty”.

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By :  ,  Financial Analyst

US discount chain Family Dollar has urged shareholders to approve the takeover offer from rival Dollar Tree, arguing that closing the deal is a "virtual certainty".

Dollar Tree today (January 12th) said it expects to shed less than 300 stores – out of a total of 5,282 in North America – as it is bidding to takeover Family Dollar. It told regulators it has already identified potential buyers.

It added it expects to close the acquisition as soon as March after the FTC's Bureau of Competition approved the store divestitures. The company would present potential buyers for the stores to the FTC within a month, Reuters reports.

Wal-Mart Stores Inc and Target Corp could be among potential buyers as they seek to expand their small-format stores, Rahul Sharma, managing director of investment advisory firm Neev Capital, told the news source.

Family Dollar has agreed to be bought by its smaller rival for $8.5 billion (£5.6 billion) in cash and stock, after rejecting a $9.1 billion offer from Dollar General Corp, arguing that the large number of stores from the chain could break competition law.

In a letter to shareholders seen by the Wall Street Journal, Family Dollar's chief executive Howard Levine said that following talks with the US government, it would be tough for Dollar General to divest itself of enough stores to secure regulatory approval. Family Dollar said there could be as many as 3,500 to 4,000 “presumptively problematic” stores in Dollar General’s unsolicited, $9.1 billion proposal.

He said that the FTC’s analysis "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."

Shares of Dollar Tree and Family Dollar were slightly down this morning, while Dollar General shares were down nearly two per cent.

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