NEW YORK - US discount chain Family Dollar has rejected an $9.7bn takeover bid from rival retailer Dollar General in the latest chapter in the war for control of the so-called "dollar store" space.
Family Dollar, the smaller of the two merchants, is holding on to an $8.5m merger deal with Dollar Tree, an even smaller competitor in the discount retail market.
"Our Board rejects Dollar General's proposal and reaffirms its support for the pending merger with Dollar Tree," said chairman and CEO Howard R. Levine.
Family Dollar said that it wasn't a matter of price, citing antitrust concerns for rejecting the buyout offer from competitor Dollar General.
These small box stores, which sell low-priced items and cater to a middle class still hurting from the fallout from the Great Recession and 2008 financial crisis, are gaining clout and looking for additional size and scale to fend off competition from bigger rivals like Wal-Mart, which is making a push into the low-price, smaller-store format, said USA Today.
The Dollar General bid for Family Dollar was $78.50 per share in cash, which topped the $74.50 cash and stock deal offered by Dollar Tree.
In announcing its bid for Family Dollar, Dollar General had said it was willing to shutter 700 stores in order to avoid any type of antitrust issues and clear the path for approval with regulators.
Analysts say the marriage between Family Dollar and Dollar General is a better fit than a Family Dollar union with Dollar Tree, said USA Today.
Family Dollar chairman and CEO Howard Levine said in a statement: "Our Board of Directors, with the assistance of outside advisors and consultants, has been carefully analyzing the antitrust issues in a potential combination with Dollar General since the beginning of this year."
"Our Board reviewed, with our advisors, all aspects of Dollar General's proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed."
The CEO of Dollar General, Rick Dreiling, said in a statement on Wednesday that Family Dollar has refused to work with his company to come to an offer even while already negotiating with Dollar Tree.
"This lack of engagement is puzzling," said Dreiling. "Regrettably, as a result, we are now forced to factor a $305 million break-up fee into our offer, consideration that could have been better used to maximize value for the Family Dollar shareholders."
Dollar Tree is No. 3 in the market. Its CEO, Bob Sasser, reiterated his commitment to the deal on Thursday's earnings call and said his company would be watching the developments closely.
Investor Nelson Peltz's Trian Fund Management LP joined Family Dollar's argument, citing antitrust worries while offering support for the smaller deal with Dollar Tree.
"Given the significant antitrust issues involved with Dollar General's proposal, we will not jeopardize the Dollar Tree deal for a transaction with Dollar General that has a high likelihood of not closing due to antitrust considerations," Trian co-founder and partner Ed Garden said in Family Dollar's release Wednesday, according to Reuters