A proxy advisory service on Wednesday urged shareholders of Family Dollar Stores to support an acquisition by Dollar Tree, citing antitrust risk associated with a competing bid by Dollar General, and the downside risk of completing no deal at all.
ISS Proxy Advisory Services had previously advised shareholders to withhold support of either deal while the regulatory picture came into better focus. However, ISS said, Dollar General’s failure to provide an additional update — or a response to Family Dollar’s revealing this week that the Federal Trade Commission would require an estimated 3,500 to 4,000 store divestitures — raises the possibility that deal won’t be consummated. In the meantime, Dollar Tree’s threat to walk away given further delay — and Family Dollar’s continued financial struggles — make the prospect of no deal particularly problematic, ISS said.
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Family Dollar’s management and board agreed to be acquired by Dollar Tree for $8.5 billion in July, and kept its support behind that deal despite a $9.7 billion takeover offer from Dollar General arriving a month later. The competing offers have set off a contentious series of dispatches between the discount rivals and widespread speculation as to the severity of what federal regulators would require of the various combinations.
Shares in Family Dollar on Tuesday fell below the price of the Dollar General offer for the first time since the offer. Dollar General, which in December extended its tender offer until Jan. 30, had no immediate comment.
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