Dollar Tree has acquired its rival discount chain Mathew’s Family Dollar for $8.5 billion after a year-long wait to close the deal that included a hostile buyout attempt from another discount retailer, Dollar General. The struggle grabbed the attention of antitrust regulators and rival bids who helped in closing the deal.
Dollar Tree now has around 13,000 stores in 48 U.S states and Canada, making it the largest chain dollar store chain with annual revenue of around $19 billion. It announced its intention to buy the Mathew’s Family Dollar July last year, but the combined entity was forced to take off 300 stores to prevent dominating some regions, said the regulators. The settlement comes in the form of a consent judgement that was reached after 17 states, including Pennsylvania, filed a lawsuit challenging the merger of the companies. As part of the settlement. Dollar Tree would soon sell 330 Family Dollar stores to a new competitor. It is expected that Sycamore Partners would purchase the stores and remain deep discount stores under the new brand Dollar Express.
Dollar Tree CEO, Bob Sasser said, “We are pleased to announce we have completed our acquisition of Family Dollar and we formally welcome the Family Dollar team to the Dollar Tree organization.” He also added, “This is a transformational opportunity for our business to offer broader, more compelling merchandise assortments, with greater values, to a wider arrays of customers. This acquisition will extend our reach to low-income customers, while strengthening and diversifying our foot print. We plan to leverage best practises across both organizations to deliver significant cost synergies. Combined, our growth potential is enhanced with improved opportunities to increase store productivity and to open more stores across multiple banners.”
The merger of Dollar Tree and Family Dollar was valued to be $9.2 billion initially but the lawsuit asserted competition substantially reduced it. As part of the deal, shareholders of Family Dollar would get $59.60 in cash, plus one-fourth of a Dollar Tree share for each Family Dollar share they own. It totals to around $79.55 per share, based on Dollar Tree’s Thursday closing price.
Further to the acquisition, Gary Philbin, Dollar Tree’s president and chief operating officer has been appointed as president and chief operations officer of Family Dollar. He has been in the company since 2001 and will continue to report to Sasser, who will take care of the combined company.
In a statement, Sasser said,”I’m very proud to announce that Gary will be taking on his new leadership role of Family Dollar Store.” He added, “Gary has played an integral role in the success of Dollar Tree over the past fourteen years. Notably, Gary was instrumental in improving the Dollar Tree customer shopping experience and the related customer satisfaction, as well as the integration following our Canadian acquisition in 2010.”
Family Dollar has strayed away from its strategy in the past year by opening up stores in suburban areas and increasing prices on many items. Considering this, Brian Yarbrough, an analyst at Edward Jones said, “I think Family Dollar has a little bit more of real estate problem that people realize.”It’s going to take several years of remodeling stores, fixing them up and probably moving some locations or shutting some locations down.” It is also expected to face massive layoffs soon.