Dollar General has made a proposal to acquire Family Dollar Stores, in a transaction valued at $9.7bn, higher than Dollar Tree's bid for the retail group last month.

Dollar General bid US$78.50 per share for Family Dollar Stores. This surpasses Dollar Tree's $8.5bn bid made in late July.

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.

Rick Dreiling, Dollar General's CEO, said: "For Family Dollar shareholders, our proposal is financially superior to the current transaction agreement with Dollar Tree and would provide Family Dollar shareholders with a substantial premium and immediate liquidity for their shares.

"For Dollar General shareholders, the proposed combination of Dollar General and Family Dollar would be a significant strategic opportunity to create immediate and lasting shareholder value. For both Dollar General and Family Dollar customers, we would be able to provide better value and greater selection."

According to Dollar General, the proposed acquisition would require it to divest up to 700 stores to alleviate potential antitrust issues.

"Dollar General has undertaken significant economic and antitrust analysis with respect to the transaction and is confident it can quickly and effectively address any potential antitrust issues," it said.

Should such a deal go ahead, the combination would solidify Dollar General's position as the largest small-box discount retailer in the US with around 20,000 stores in 46 states and sales of over $28bn.