Family Dollar's Future Under Wrap

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Oct 02, 2014

We should not be expecting the acquisition of Family Dollar Stores (FDO, Financial) to go down without a fight, as the second bid by Dollar General (DG, Financial) that was declined by the former is currently being assessed by attorney generals. Family Dollar recently announced that certain state attorney generals have notified the company that they would investigate the takeover bid of Dollar General which went hostile after repeated rejections from the deep discount retailer. After being spurned twice, Dollar General has taken the bid to the shareholders of Family Dollar, thus raising several eyebrows. Presently though Family Dollar urges to be taken over by Dollar Tree (DLTR, Financial), another rival of Dollar General, the investigation has raised queries on its ultimate future. Also, Family Dollar which is lagging behind its competitors is devising new strategies to maintain it’s pricing as competitive when compared to its immediate rivals. Let’s get to the crux to understand the present scenario for Family Dollar.

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The takeover bid brings immediate concerns

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Dollar General’s sweetened all-cash bid of $9.1 billion got expelled by Family Dollar which decided to stick to the lower $8.5 billion cash-and-stock deal from Dollar Tree. Soon after the rejection, as decided by Dollar General’s management last month, the company became hostile to acquire Family Dollar and steal it from the clutches of Dollar Tree.

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Dollar General has offered to sell up to 1,500 stores and to pay $500 million as break-up fee if the deal fails to clear antitrust issues. But Family Dollar stated in the recent Securities and Exchange Commission filing that it has notified the FTC about the state AGs plans to look into the rejected bid, though it did not name the states holding such investigation. So this brings in a new face into the takeover bid placed by Dollar General which is concerned on this acquisition as it would help in growing its sales numbers in the U.S., if this deal finally sees the light of the day.

Family Dollar implementing new strategies

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While the final acquirer is yet to be decided for the retailer, it has recently devised certain strategies to maintain its perch in front of heavy competition. Presently it has launched an “Ad Match Promise” program in which the retailer would match prices when customers bring in a printed ad from a local competitor. Family Dollar hopes to match “buy one get one free” offers as well, as long as the price of the item is specified in the ad.

According to the chief merchandising officer, Jason Reiser, of Family Dollar, “In today’s uncertain economic climate, many of our customers are struggling to make ends meet. We designed our new ‘Ad Match Promise’ program with them in mind. Family Dollar has long been synonymous with everyday low prices on brand-name items and quality, private brand merchandise. With this new program, our customers will no longer have to search all over town for the best deal. Simply bring in any local competitor’s printed advertisement, and we’ll match it item for item; plain and simple.”

For more than 50 years, Family Dollar has been providing value and convenience to customers in easy-to-shop neighbourhood locations. Its mix of name brands, and quality, appeals to several shoppers in rural and urban areas spanning across 46 U.S. states. This new program will further aid the company to cope up with growing rivalry in the discount retail sector.

Final word

Dollar General has extended the tender offer to acquire Family Dollar to October 31, and time will suggest how things finally take shape. Let’s stay connected and keep watching – as Family Dollar continues to develop strategies for growth in the upcoming future.