Dollar Tree’s Bob Sasser to Family Dollar CEO: We Are at ‘the End of Our Patience’

CHARLOTTE, N.C. (The Charlotte Observer/TNS) -

The chief executive of Dollar Tree, the discount retailer trying to buy Family Dollar, has some strong words for Family Dollar CEO Howard Levine: “We … have reached the end of our patience.”

Family Dollar, based in the Charlotte suburb of Matthews, N.C., has been trying to fend off rival Dollar General and complete the proposed buyout by Dollar Tree, which the companies agreed to last year. But Family Dollar twice has delayed a vote on the Dollar Tree deal, hoping to build enough shareholder support.

In late December, Family Dollar adjourned its special shareholder meeting because the company lacked enough votes to approve the Dollar Tree acquisition.

Now, shareholders are set to vote on the Dollar Tree deal Jan. 22 in Charlotte. In a strongly worded letter to Levine released Monday, the Dollar Tree CEO said he won’t accept pushing back the vote a third time.

“After two delays, we have been more than reasonable, but have reached the end of our patience,” Bob Sasser wrote. “We hope that Family Dollar’s shareholders decide to support Dollar Tree’s transaction. … But we are prepared to accept whatever judgment they make.”

Sasser also wrote that the uncertainty is “continuing to damage Family Dollar’s business.” Last week, Family Dollar reported a slump in profits, and Levine said the company is losing employees at its headquarters in Matthews. Family Dollar employs about 1,300 there, down 100 from its employee count before the takeover battle started.

In a sign that some investors were cooling on the prospect of a Dollar General deal, Family Dollar’s stock fell almost 1.7 percent Monday, closing at $76.69. That’s closer to Dollar Tree’s $74.50-per-share price than Dollar General’s offer of $80 a share. On Tuesday, the stock gained 17 cents, or 0.2 percent, to $76.86.

Although Dollar Tree’s cash-and-stock offer is lower than Dollar General’s all-cash bid, Levine has argued the Federal Trade Commission is much more likely to approve the Dollar Tree deal. Dollar General’s business model is much more similar to Family Dollar’s, and the stores have more overlapping locations. Levine contends that would lead antitrust regulators to block a deal or require crippling store divestitures.

In a letter to shareholders Monday, Family Dollar CEO Howard Levine said the company’s analysis with the FTC is ongoing, but initial results indicate antitrust regulators would require the combined retailer to sell up to 4,000 stores if rival Dollar General buys the company. Such a hurdle could make the deal difficult to complete.

On the other hand, Levine said the FTC has indicated Dollar Tree would need to sell only 300 or fewer stores.

If Family Dollar shareholders approve the deal, the Dollar Tree transaction could be completed by March, Levine wrote. If they don’t, and the company instead is bought by Dollar General, Family Dollar would owe a $305 million breakup fee to Dollar Tree.

Sasser, the Dollar Tree CEO, said some Family Dollar shareholders still are holding out for a higher offer from Dollar Tree.

“We have been hearing that some of your shareholders, mostly arbitrageurs and hedge funds with new positions in your stock, have been saying that they will not support our transaction unless we raise our price,” wrote Sasser.

He said rejecting Dollar Tree’s offer in favor of a Dollar General bid, which the FTC might block, would be “misguided and potentially disastrous.”

Founded in Charlotte in 1959 by businessman and philanthropist Leon Levine, Family Dollar is one of the region’s most prominent retailers. The company’s board of directors has voted unanimously to recommend the Dollar Tree deal.

Levine said if shareholders reject the Dollar Tree deal, there’s a “significant risk” that the company would be left as a standalone, since the FTC might block Dollar General’s bid. If that’s the case, Family Dollar would face “challenging and deteriorating” circumstances trying to compete on its own, the company warned.

Dollar General has said its own analysis shows it would be possible to make a deal work, and has agreed to sell up to 1,500 stores to satisfy the FTC. The company did not respond to a request for comment on Family Dollar’s letter Monday.