Dollar General raises bid for Family Dollar, ready to go hostile

Dollar General is willing to make a higher bid for Family Dollar Stores and is prepared to go hostile Family Dollar refuses a negotiated deal, The New York Times reported.

Dollar General yesterday offered to increase its bid for Family Dollar to $9.1 billion after its earlier offer that would have beaten a rival $8.5-billion agreed deal with Dollar Tree in late July, was rejected.

More importantly perhaps, Dollar General - the biggest dollar-discount chain in the country - also added new provisions to its bid for providing more assurances to Family Dollar Stores in case their proposed merger ran into antitrust issues.

Family Dollar had rejected Dollar General's original bid last month, over anti-trust concerns, even as it privately suggested that any bid of the kind called for assurances - such as what was known as a ''hell or high water'' provision requiring any and all reasonable steps to guarantee a deal's closing - should the government closely scrutinise the proposed union (See: Family Dollar rejects $9-bn Dollar General offer, accepts lower bid from Dollar Tree).

However, if Family Dollar did not begin talks soon, Dollar General warned that it might take its case directly to its target's shareholders, increasing the possibility of a bitter fight between two of the country's biggest deep-discount retailers.

Meanwhile, Richard Duprey, writing in The Motley Fool, wonders whether all the early momentum Dollar Tree gained from announcing last month it was buying rival deep discounter Family Dollar had been lost amid a competing bid for the chain by Dollar General and an earnings report that, while reporting higher revenues and another quarter of positive same store sales, still came up short on profits.

Dollar General made a competing bid of $8.9 billion to Dollar Tree's $8.5 billion and although Family Dollar rejected the competing bid, saying it needed assurances it would not run into anti-trust problems, Dollar General waived off the concerns saying it was committed to staying in the race. (Dollar General bids $8.95 bn for Family Dollar Stores)