Dollar Tree is buying rival discounter Family Dollar for $8.5 billion, significantly broadening its reach as it looks to fend off Wal-Mart, which has been stepping up its courtship of lower-income customers.
The deal makes Dollar Tree the biggest player in the dollar store segment, with its more than 13,000 combined locations eclipsing current leader Goodlettsville-based Dollar General Corp., which has about 11,300.
Analysts had hinted for months that Dollar General might make a bid, but ultimately the retailing giant didn’t make a move. With this latest deal, what are the next steps for Dollar General?
• Up the ante: Activist investor Carl Icahn said he was “extremely pleased” with Dollar Tree’s plans, but that he still thinks there are “a handful of potential buyers who could realize greater synergies” with Family Dollar.
That could leave the door open for a last-minute deal. However, Bloomberg reported Monday that Dollar General already had turned down the chance to make a higher-dollar offer.
• Sell to Wal-Mart: One retail analyst raised the prospect that Dollar General itself might be a takeover target for Wal-Mart, which might want to bolster its number of smaller-format stores in a big way. But that’s a long shot. Even if Dollar General were interested, federal anti-trust regulators would have lots of issues with the retailers — two of the nation’s largest — joining forces.
• Keep growing: Dollar General recently passed the 11,000-store mark and is in full growth mode. It just entered three new states and says it has plenty of room to grow.
CEO Richard Dreiling said during a recent conference call that the company plans to add 700 new stores in 2014.
SOURCE: USA Today