Family Dollar to Learn Fate at Thursday Vote: 3 Possible Outcomes

Family Dollar shareholders will likely approve a deal Thursday to sell the retailer to Dollar Tree, ending local control of one of the Charlotte region’s most prominent homegrown companies.

The drama has stretched on since July, with Family Dollar fending off a hostile bid from Dollar General to try to complete the planned acquisition by Dollar Tree. The fight reached a climax last week when Dollar General said it needs more than a month to figure out whether the Federal Trade Commission will allow or block its bid.

That uncertainty and Dollar General’s decision to not raise its bid likely doomed it, a source with knowledge of Family Dollar’s thinking said. Several analysts following the deal agreed.

Here are the three possible scenarios at Thursday morning’s vote:

FAMILY DOLLAR SHAREHOLDERS APPROVE THE DOLLAR TREE TAKEOVER

This is the outcome most observers are expecting after Dollar General’s statements last week. Two major shareholder-advisory firms also switched their recommendations last week and told Family Dollar shareholders to vote for the Dollar Tree deal. If a majority of Family Dollar shareholders vote yes, Dollar Tree will buy Family Dollar for $74.50 a share, or about $8.5 billion.

The companies would have to sell some of their stores to satisfy regulators’ antitrust concerns, but the retailers have said they would need to divest 300 or fewer locations out of a combined total of more than 13,000. The deal could close in March, both companies have said, and Family Dollar would become a subsidiary of Dollar Tree.

Family Dollar CEO Howard Levine would stay on at the combined company for at least two years, and join Dollar Tree’s board of directors. The Family Dollar name would live on, both companies have said, remaining on many stores. Some of Family Dollar’s 1,300 corporate jobs would be retained at its headquarters in the Charlotte suburb of Matthews, N.C., though the companies haven’t said exactly how many.

FAMILY DOLLAR DELAYS THE VOTE AGAIN

Family Dollar has twice delayed the vote, which was originally supposed to be held in early December. The company adjourned its shareholder meeting Dec. 23 because the company didn’t have enough support from shareholders to win approval for the Dollar Tree deal.

But Dollar Tree CEO Bob Sasser warned in a letter released last week that the deal would be off the table if Family Dollar delays the vote again. “After two delays, we have been more than reasonable, but have reached the end of our patience,” Sasser wrote.

Dollar Tree could seek a $305 million breakup fee from Family Dollar if the company delays the vote again. Family Dollar would then be left to either try to strike a deal with Dollar General or try and make it as a stand-alone company.

FAMILY DOLLAR SHAREHOLDERS REJECT THE DOLLAR TREE DEAL

If Dollar Tree’s bid fails, Family Dollar could be left in a precarious position. The company would be under intense pressure to make a deal with Dollar General, which has offered $9.1 billion to buy the company. But such a deal could present problems: Family Dollar has consistently argued that Dollar General’s bid would be blocked by the FTC because of antitrust concerns.

Dollar General has said it would fight the FTC in court to win approval for acquiring Family Dollar, but that could take months or longer. Even if the FTC allows the deal, regulators could require the combined company to sell thousands of its almost 20,000 stores – an onerous condition that could cause Dollar General to back out.

Without a deal with Dollar Tree or Dollar General, Family Dollar would be left to fend for itself as an independent company. But Family Dollar put itself up for sale because it was having difficulty doing just that, with profits falling and its strategy failing to lure shoppers. Family Dollar has warned it would face considerable difficulties as a stand-alone retailer — especially now that it has been battered by an extended takeover fight.

And if Family Dollar and Dollar General strike a deal? Family Dollar’s business model is much more similar to Dollar General’s than to Dollar Tree’s. Analysts have said that makes it much more likely the Family Dollar name would be phased out and the Matthews headquarters completely closed under a Dollar General acquisition. Dollar General hasn’t said what it would do with the Matthews headquarters.

This article appeared in print in the January 21st, 2015 edition of Hamodia.