Dollar General Corp. (NYSE:DG) has also joined the battle to acquire Family Dollar Stores, Inc. (NYSE:FDO) in an interesting development today. Dollar Tree, Inc. (NASDAQ:DLTR) made a bid for the North Carolina based retail discount store late last month. Joe Feldman, Retail Analyst at Telsey Advisory Group, shared his views on the ongoing bidding war for Dollar General on ‘Bloomberg Surveillance’.
Family Dollar Stores, Inc. (NYSE:FDO) has been in talks with Dollar Tree, Inc. (NASDAQ:DLTR) since March to be acquired by the latter. Dollar General Corp. (NYSE:DG) was also presumed to be a likely contender but Dollar Tree made the first bid in late July offering $74.50 per share in cash and stock.
Dollar Tree, Inc. (NASDAQ:DLTR)’s plans to take down Dollar General Corp. (NYSE:DG), the leader among the discount retailers, was thwarted by an announcement from Dollar General for an offer for Family Dollar Stores, Inc. (NYSE:FDO). The cash offer from Dollar General is valued at $9.7 billion, which translates into $78.50 per share in cash, which was significantly higher than Dollar Tree’s offer last month. Feldman, however, felt that there is a probability for a counter bid to arise.
“I would think there’s more capacity for both of them to raise their offer. So yes, I would think that there will be a higher bid […],” he told Tom Keene.
If the bid from Dollar General Corp. (NYSE:DG) goes through, its position as the front-runner of the dollar stores chain will be bolstered. Since the offer was received, both Dollar General’s and Family Dollar Stores, Inc. (NYSE:FDO)’s shares seemed to be on an upward trend with the former growing by almost 8% and the latter by 5%. Feldman reasoned that this was because analysts were looking forward to such a proposal from Dollar General.
“I think people had wanted to see Dollar General get into this deal and there is a lot more direct overlap between the two companies […] So, I think this is a more attractive field for the Family Dollar guys […],” he said.