In a new filing with the Securities and Exchange Commission, Paul Singer‘s Elliott Management disclosed a 6.8% activist stake in Family Dollar Stores, Inc. (NYSE:FDO). As the filing shows, Elliott Management together with its affiliates own around 7.72 million shares of Family Dollar Stores, versus some 3.30 million shares disclosed in the latest 13F filing.
Mr. Singer initiated a stake in Family Dollar Stores during the third quarter of 2014. Since Elliott is an activist fund, on October 17 it sent a letter to the company nominating seven candidates to be elected to the company’s board of drrectors at the 2015 annual meeting of stockholders. Family Dollar Stores, Inc. (NYSE:FDO) is currently in the process of a merger with Dollar Tree, Inc. (NASDAQ:DLTR). At the end of July both companies announced that Dollar Tree will acquire Family Dollar in a cash-and-stock transaction, which values the Family Dollar at $74.50 per share. Shareholders are yet to approve the merger. The company had previously scheduled a meeting to allow shareholders vote on the proposal, but later the meeting was rescheduled for December 23. The delay came on the back of the Federal Trade Commission (FTC) concerns regarding divestitures of stores in connection with the merger.
In addition, while both Dollar Tree and Family Dollar Stores, Inc. (NYSE:FDO) entered into a merger agreement, another retailer also stepped up with a bid for the company. Dollar General Corp. (NYSE:DG), which was initially considered a more suitable buyer for Family Dollar by Carl Icahn, made a hostile takeover bid of $80 per share, but the deal was rejected by the board of Family Dollar on the basis that such a deal would raise antitrust concerns, even though the proposal also included a reverse break-up fee of $500 million in case the deal is not approved by regulators.
As Family Dollar Stores, Inc. (NYSE:FDO) was in the middle of a bidding war between Dollar General and Dollar Tree, Inc. (NASDAQ:DLTR), investors have raised their bullish sentiment regarding the company. In this way, during the third quarter, the number of funds that disclosed long positions in the company went up by 17 to 56 funds out of more than 700 that we track. These 56 funds disclosed ownership of approximately $3.44 million worth of Family Dollar stock, up from $2.09 billion in the previous quarter. One of the largest shareholders of the company is Nelson Peltz’s Trian Partners, which holds 8.37 million shares as of the end of September, followed by John Paulson’s Paulson & Co with 8.02 million shares. Mr. Peltz has also expressed his support for the merger of Dollar Tree and Family Dollar, the deal that will earn Trian Partners around $370 million, according to some estimates.
Carl Icahn was one of the investors that pushed for the sale of Family Dollar, but was disappointed with the outcome. Mr. Icahn initiated a stake with 9.39% of the company at the beginning of June and soon after that he sent a letter to the CEO of the company urging him to put the company up for sale. However, as Mr. Icahn expected a merger between Family Dollar Stores, Inc. (NYSE:FDO) and Dollar General Corp. (NYSE:DG), after the company agreed to be acquired by Dollar Tree, he cut down the stake, still obtaining a couple of hundred million dollars.
In this way, as the special meeting of Family Dollar Stores, Inc. (NYSE:FDO)’s shareholders is expected in a couple of weeks, Mr. Singer’s strategy to nominate a new slate of directors for the next meeting of shareholders is an interesting strategy. Elliott has not disclosed its position regarding the merger and we shall wait and see as more details surrounding this story appear.
Disclosure: none
