Family Dollar Stores Inc. rejected a $9.1-billion takeover offer from rival discounter Dollar General Corp., raising the possibility that Dollar General will make a hostile bid for its smaller competitor.
Family Dollar cited antitrust concerns for rejecting the deal Friday—the same reason its board killed Dollar General's original $8.9-billion offer last month. Dollar General's chief executive had said the company may take its latest offer directly to shareholders if Family Dollar's management rejected it.
But tossing aside that warning, Family Dollar's board "reaffirmed its support" for a deal with Dollar Tree Inc.—in which the Chesapeake, Va., company would acquire Family Dollar for $8.5 billion in cash and stock.
Although all three companies are discounters, Dollar General, of Goodlettsville, Tenn., and Family Dollar, of Matthews, N.C., have more in common.
Both chains target shoppers in urban and rural markets with food and daily necessities at a variety of price points. Dollar Tree, on the other hand, is located primarily in suburban neighborhoods with goods all priced at $1 or less.
"There is a very real and material risk that the transaction proposed by Dollar General would fail to close, after a lengthy and disruptive review process," Family Dollar Chief Executive Howard R. Levine said in a statement. "Accordingly, our board has rejected Dollar General's revised proposal."
In a sign of commitment to the deal reached in July, Dollar Tree said it would shed as many stores as necessary to get the Family Dollar deal through regulators. The companies said they expect the deal to close "as early as the end of November."
Dollar General's rejected offer included a commitment to unload up to 1,500 stores if the Federal Trade Commission required it.
The combination of Dollar Tree and Family Dollar has the potential to knock off Dollar General as the nation's leading deep-discounter.