Stretching out the Dollar…Tree to a respectable $8.5 billion is spending wisely for Dollar Tree’s Chief Executive Officer, Bob Sasser. In a deal officiated today, July 28, 2014, Dollar Tree acquired larger company and rival Family Dollar for $74.50 a share.
Sasser is calling the deal a, “transformational opportunity with the acquisition of Family Dollar, stores [Dollar Tree] will become the leading discount retailer in North America with over 13,000 stores in 48 states and 5 Canadian provinces.”
Family Dollar stockholders will own around 13 percent and around 15 percent of Dollar Tree’s outstanding common shares. This morning, shares spiked more than 24 percent and are headed for a record high.
Considering the two chains have over 13,000 stores combined as well as combined revenue of $18 billion per year, the acquisition may very well be a bargain.
Unlike Dollar Tree, Family Dollar had items for over $1 while Dollar Tree’s merchandise never exceeds $1.
Like many discount retailers, Family Dollar suffered a hard blow due to the recession and has struggled since, even after attempting to boost sales by lowering their all ready low prices. Family Dollar went on to cut out some jobs and shut down poor performing stores with little return.
Family Dollar began receiving push from prominent Wall Street investors in the company as early as 2011. Nelson Peltz, with his 7.9 percent stake in the company, was one of the first to try and persuade Dollar Tree’s CEO, Howard Levine, to pursue a deal. Levine resisted.
Levine changed his mind after investor Carl Icahn, with his 9.4 percent stake in the company, wrote to Levine in early June, 2014. In the letter Icahn urged him to put the company up for sale immediately and demanded that three of his representatives be added to Family Dollar’s board. Levine finally agreed.
According to the deal, Levine will join Dollar Tree’s board and continue running Family Dollar stores and report back to Sasser.
Family Dollar is a chain of stores, having around 8000 locations in US. They have 1300 employees and the variety store chain is the ins largest retailer in this business sector.
Dollar Tree is a chain of discount stores that sell things for a one dollar maximum price. They own around 4880 stores in Canada and US. They operate under the following names : Dollar Tree, Dollar Bills and Deal$. It’s target is low-end market.