Tomahawk, WI 07/29/2014 (Basicsmedia) – Dollar Tree, Inc. (NASDAQ:DLTR) is the cynosure of traders’ eyes—voluminous trading and rising prices, as it agreed to decide upon fostering sprawling discounts in the days to come; eventually, DLTR showed their intent to acquire Family Dollar Stores, Inc. (NYSE:FDO) at a whopping $85 billion. DLTR expects to create a sustained discount chain, catering to $18 billion sales across a myriad of retailers in the US.
Dollar Tree, Inc. (NASDAQ:DLTR) intends to pay $74.50 for a share, particularly in cash and accumulated stock, approximately 23% above the FDO’s closing price last week. The deal is priced at $9.2 billion, including debt. This exquisite purchase is deemed to transform the dollar-store market and fulfill the profound ambitions of the multi-billionaire investors – Nelson Peltz and Carl Icahn – the primary stakeholders in Family Dollar Stores, Inc. (NYSE:FDO), who took the onus in pushing for an impactful sale.
Market analysts and stock holders conjecture that Family Dollar Stores, Inc. (NYSE:FDO) has been under pressure for quite some time and DLTR’s offer is a respite for the FDO officials. Hence, the scenario is ‘win-win’ for both the parties. Dollar General Corp. (NYSE:DG) notched up a chance to bid for FDO earlier; however, the management had declined the chance.
The Merger May Hurt Dollar General
Once FDO and Dollar Tree, Inc. (NASDAQ:DLTR) teams up, as is likely, the coming together would act as a harbinger to lessening of market share for DG. The new DLTR has plans to operate separate chains across 13K locations in Canada and the US. The CEO of DLTR, Bob Sasser commented that the chains would complement each other, and would add sumptuous brand equity, after years of sluggish performances.
Before the deal was reached, FDO tried to improve its operations—it closed 370 stores that were underperforming and opted for a few new ones. This classy merger is likely to save $300 million annually, once the merger-transaction gets closed in 2015!
The sale of Family Dollar Stores, Inc. (NYSE:FDO) is significant, and incidentally, is a culmination of a detailed strategic review by FDO’s management. The merger is indeed a great outcome for all shareholders.