Family Dollar Stores on Monday acknowledged receipt of a letter from minority investor Elliott Advisors critical of the company’s backing of a merger agreement with Dollar Tree — and the rejection of a competing offer from Dollar General.
Family Dollar said it would review the proposal from Elliott Advisors — including Elliott’s suggestion of a slate of new board members — “in due time.” Ellliott in a letter to the board said the Family Dollar board erred in failing to encourage a “bidding war” between suitors before giving its support to the Dollar Tree deal. Fellow activist investor Carl Icahn previously expressed similar sentiments.
Elliott is holder of 4.9% of Family Dollar stock. It said its proposed seven board members, who would stand for election to the company’s annual meeting in January — “have a breadth and depth of experience that will be certain to add value to the Board in its deliberations and negotiations with Dollar Tree and Dollar General.”
Analyst Scott Mushkin of Wolfe Research in a note Monday said the pressure from an additional investor against accepting the Dollar Tree offer was positive, but predicted that the Federal Trade Commission’s view of the respective offers would ultimately determine the winner.
“The threat of a large shareholder nominating a slate of candidates to replace sitting Family Dollar board members should help motivate FDO to negotiate fairly with Dollar General at the appropriate time,” Mushkin said.
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