Family Dollar Stores has rejected a non-binding acquisition proposal by Dollar General on the basis of antitrust regulatory considerations.

Dollar General this week bid US$78.50 per share for Family Dollar Stores, surpassing an earlier $8.5bn bid by Dollar Tree in late July.

However, in a notice today (21 August), Family Dollar said its board unanimously reaffirmed its recommendation in support of a merger agreement with Dollar Tree.

Dollar Tree's deal is valued at $74.50 per share, a 22.8% premium over Family Dollar's closing price as of 25 July.

"The Family Dollar board, after consultation with its financial and legal advisers who have conducted an extensive antitrust analysis, determined that the Dollar General proposal fails to satisfy this requirement," the company said. "The board's decision follows the unanimous recommendation of a committee of four non-management independent directors that has been overseeing the company's consideration and exploration of strategic alternatives since January 2014."

Dollar General had said it would divest up to 700 stores to alleviate potential antitrust issues if a deal were to happen.

A combination of Dollar General and Family Dollar would result in around 20,000 stores across 46 states, with sales of more than $28bn.

Investor Nelson Peltz's Trian Fund Management also cited antitrust concerns: "Given the significant antitrust issues involved with Dollar General's proposal, we will not jeopardise the Dollar Tree deal for a transaction with Dollar General that has a high likelihood of not closing due to antitrust considerations. We remain fully committed to the Dollar Tree transaction."