Family Dollar is up for sale. The question is, who is going to buy it? Dollar Tree made an initial bid for the company of $74.50 a share in July, while Dollar General has gotten into the game with a higher bid of $80. Dollar General seems determined to buy Family Dollar and has threatened to take the issue to shareholders in a hostile bid.
John Paulson, who is the third largest shareholder of Family Dollar with a 7% stake, and who also has a position in Dollar General, has yet to make a public statement about the acquisition. The other two major investors, who own a combined 15% stake in the company, prefer the lower-priced Dollar Tree offer, because that merger would be less likely to run into anti-trust headwinds, since the merchandise of Dollar Tree and Family Dollar are less similar than that of Family Dollar and Dollar General.
If Paulson favors the Dollar Tree bid, it is unlikely Dollar General will be successful in a hostile takeover. Noel Herbert, a Bloomberg analyst commented, “If you get 22% on one side of the fence, it is a pretty high hurdle for Dollar General to cross to win enough shareholders over.”
Dollar General claims that one reason Family Dollar favors the Dollar Tree bid, even though it is for less money, is that the merger will keep Howard Levine as CEO. Levine is the largest shareholder of Family Dollar, and owns 9.3 million shares or 8.3% of the company.