The competing suitors for Family Dollar Stores are getting punchy. On Friday, both Dollar Tree and rival Dollar General issued statements on the ongoing Federal Trade Commission study of their respective transactions, with Dollar Tree claiming that its deal would require fewer than 500 divesitures while the offer from Dollar General could require at least three times that. Dollar General in response said its own data “tells a very different story.”
Shareholders of Family Dollar are expected to vote Dec. 23 on whether to accept an $8.5 billion offer to be acquired by Dollar Tree. Dollar General in the meantime has made a $9 billion competing offer. The extent of divestitures required by the FTC — and the ability of the suitors to raise their offers as a result, if necessary — could ultimately determine how shareholders vote, analysts said.
Dollar Tree, whose offer has the support of Family Dollar’s board and management, acknowledged the FTC is “very focused” on how a merger of discount retailers could affect pricing. While roughly 150 Family Dollar stores adjust prices due at least in part to the presence of Dollar Tree, about 5,400 Family Dollar stores adjust prices due at least in part to the presence of Dollar General, Dollar Tree said. Further, Dollar Tree said, fewer than 50 Family Dollar stores are in zones where prices could rise by more than 2% on average under Family Dollar's pricing rules in the absence of a Dollar Tree. By contrast, more than 3,300 Family Dollar stores are in zones where prices would rise by more than 2% on average under Family Dollar's pricing rules in the absence of a Dollar General.
Dollar General in a response took issue with those findings, emphasizing that Walmart, not Family Dollar, is the primary driver regarding its strategic pricing decisions, and more than 90% of Dollar General's SKUs not subject to zone pricing. “There is no reason to believe that the FTC would take into account only Family Dollar's documents and data or afford them greater significance than Dollar General's own evidence,” Dollar General said.
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