Dollar General is mulling its next step after Family Dollar rejected its enhanced takeover proposal

Dollar General is mulling its next step after Family Dollar rejected its enhanced takeover proposal

US discount retailer Dollar General is mulling its next step, after its improved bid for rival Family Dollar was rejected on the basis of antitrust regulatory considerations.

Last week, Dollar General increased its all-cash offer for Family Dollar from US$78.50 per share to $80.00 and offered to divest up to 1,500 stores. But this was rejected again on the basis of antitrust regulatory considerations.

Family Dollar chairman and CEO Howard Levine said the company's board concluded that it is not reasonably likely the deal would be completed on the terms proposed.

"There is a very real and material risk that the transaction proposed by Dollar General would fail to close, after a lengthy and disruptive review process," he added.

The agreement with Dollar Tree delivers "attractive value" in the form of immediate upfront cash and upside participation in a combined Dollar Tree-Family Dollar entity, as well as closing certainty.

Meanwhile, Dollar Tree has committed to divest as many stores as required to obtain antitrust clearance. The two companies expect the agreement to close as early as the end of November.

"Our amended agreement is clearly superior to Dollar General's revised proposal based on antitrust risk, deal certainty and time value of money," said Dollar Tree CEO Bob Sasser.

He added that the Dollar Tree expects to be required to divest few, if any, stores because its business model is significantly different to Family Dollar's. "Our product assortment and pricing is not driven by local competition, and we have very limited store overlap."