Dollar Tree acquires Family Dollar for $8.5 billion

CHESAPEAKE, Va. — Dollar Tree on Monday morning acquired Family Dollar Stores in a cash and stock transaction worth about $8.5 billion. The value of the consideration is $74.50 per share, a 22.8% premium over Family Dollar's closing price as of July 25, 2014.
 
"This is a transformational opportunity," stated Bob Sasser, Dollar Tree's CEO. "With the acquisition of Family Dollar Stores, Dollar Tree will become a leading discount retailer in North America, with over 13,000 stores in 48 states and five Canadian Provinces, sales of over $18 billion, and more than 145,000 associates on our team. We will continue to operate under the Dollar Tree, Deals and Dollar Tree Canada brands, and when this transaction is complete, we will operate under the Family Dollar brand as well," he said. "Throughout our history, we have strived continuously to evolve and improve our business. This acquisition, which enhances our footprint and diversifies our company, will enable us to build on that progression, and importantly, positions Dollar Tree for accelerated growth. By offering both fixed-price and multi-price point formats and an even broader, more compelling merchandise assortment, we will be able to provide even greater value and choice to a wider array of customers."
 
The transaction, which has been unanimously approved by the boards of directors of both companies, is expected to close by early 2015, at which time the Family Dollar shareholders will receive $59.60 in cash and $14.90 equivalent in Dollar Tree shares. At closing, Family Dollar shareholders will own no less than 12.7% and no more than 15.1% of the outstanding common stock of Dollar Tree. 
 
Howard Levine and Trian Fund Management, and funds managed by it, which collectively own approximately 16% of the outstanding stock of Family Dollar, have entered into voting agreements in support of the merger.
 
"This acquisition will extend our reach to lower-income customers and strengthen and diversify our store footprint," Sasser added. "We plan to leverage best practices across both organizations to deliver significant synergies, while we accelerate and augment Family Dollar's recently introduced strategic initiatives. Combined, our growth potential is enhanced with improved opportunities to increase the productivity of the stores and to open more stores across multiple banners."
 
Levine, chairman and CEO of Family Dollar, will remain with the company and report directly to Sasser. Upon closing, Levine will become a member of the Dollar Tree board of directors. 
 
According to the companies, Dollar Tree is the nation's leading operator of fixed-price point stores, selling everything for $1 or less, and Family Dollar is a leading national operator of multi-price point stores providing value-conscious consumers with a selection of competitively priced merchandise in convenient neighborhood stores. Dollar Tree intends to retain and to grow each of its brands and the Family Dollar brand going forward and will optimize the combined real estate portfolio.
 
Dollar Tree targets customers within a broad range of Middle America with stores located primarily in suburban areas and Family Dollar targets low- and lower-middle income households through its urban and rural locations.
 
Dollar Tree expects to generate significant efficiencies in sourcing and procurement, SG&A leverage, distribution and logistics efficiency, and through format optimization. Dollar Tree anticipates that the transaction will result in an estimated $300 million of annual run-rate synergies to be fully realized by the end of the third year post-closing.
 
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